The History of US Government Corporate Bailouts

Get the breakdown on who the United States has bailed out, for how much, and what happened, in this infographic:

Too Big to Fail: A History of Government Bailouts

The money that presidents Bush and Obama have recently showered on the auto industry, insurance companies and financial institutions aren’t the first dollars that the federal government has used to bail out companies or entire industries that are labeled “too big to fail.”

In fact, since the 1970s, the federal government has rarely shied away from throwing around its financial weight to keep certain businesses afloat.

This is a controversial practice. Taxpayers and advocacy groups don’t like spending their money to prop up companies or industries that have suffered financial problems because of perceived wrongdoing or mismanagement. The government often argues that it is saving industries that are too important to the country to die. If they did, the government argues, the country’s economy would be in danger.

Who’s right? As with most big questions, there’s no one correct answer. But if you think that the recent government bailouts are something new, you don’t know your history.

For instance, the government helped bailout the struggling railroad industry in 1970. A nearly bankrupt Penn Central Railroad asked the government for assistance. The government, not wanting to see the railroad collapse, provided $676 million in loan guarantees and consolidated Penn Central with five other struggling railroad companies to form Consolidated Railroads.

In 1980, the government backed the Chrysler Corporation Loan Guarantee Act of 1979. This allowed Chrysler to borrow $1.5 billion in privately funded loans. This helped rescue the troubled automaker from bankruptcy.

One of the first banks labeled with the “too big to fail” moniker, Continental Illinois National Bank & Trust Company stayed alive in 1984 thanks to a rescue from the FDIC. The FDIC injected $4.5 billion into the struggling bank and took over 80 percent of its shares.

Following the terrorist attacks of Sept. 11, 2001, Congress passed the Air Transportation Safety and System Stabilization Act. This provided $15 billion to airlines to help cover the costs of the government’s order to ground all aircraft in the days following the terrorist attacks. It also helped airlines defend against any lawsuits resulting from the attacks.

Of course, 2008 was a banner year for government bailouts. The government provided funds to Bear Stearns in the form of a $29 billion non-recourse loan; promised up to $100 billion each to mortgage finance giants Fannie Mae and Freddie Mac, in an effort to save the struggling mortgage industry; gave $150 billion to insurance company A.I.G. in three separate payments; provided Ford, General Motors and Chrysler with a $25 billion stimulus package; and issued a total of $351 billion, in the form of bailout money and loans, to Citigroup.

What will the results of the 2008 bailouts be? Again, that’s a question to which no one has a definitive answer. It’s important to remember, though, that the 2008 bailouts weren’t the first and certainly won’t be the last issued by the federal government.