Bailout

AAA

DEFINITION of 'Bailout'

A situation in which a business, individual or government offers money to a failing business in order to prevent the consequences that arise from a business's downfall. Bailouts can take the form of loans, bonds, stocks or cash. They may or may not require reimbursement.

INVESTOPEDIA EXPLAINS 'Bailout'

Bailouts have traditionally occurred in industries or businesses that may be perceived as no longer being viable, or are just sustaining huge losses. Typically, these companies employ a large number of people, leading some people to believe that the economy would be unable to sustain such a huge jump in unemployment if the business folded.

For example, Chrysler, a large U.S. automaker was in need of a bailout in the early 1980s. The U.S. government stepped in and offered roughly $1.2 billion to the failing company. Chrysler was able to pay the entire bailout back, and is currently a profitable firm.

One of the biggest bailouts is the one proposed by the U.S. government in 2008 that will see $700 billion put toward bailing out various financial organizations and those affected by the credit crisis.

RELATED TERMS
  1. Bank Levy

    1) A type of taxation system on financial institutions, in which ...
  2. Build America Bonds - BABs

    Taxable municipal bonds that feature tax credits and/or federal ...
  3. Congressional Oversight Panel - ...

    A panel created by the U.S. Congress in 2008 to oversee for the ...
  4. American Recovery And Reinvestment ...

    An act initiated and signed by U.S. President Barack Obama in ...
  5. Financial Stability Plan (FSP)

    A plan unveiled by the Obama administration in April, 2009, that ...
  6. TARP Bonuses

    A buzzword coined by the financial media during the financial ...
Related Articles
  1. Insurance

    Falling Giant: A Case Study Of AIG

    Find out why the U.S. government approved an enormous bailout package for American Investment Group (AIG).
  2. Insurance

    Top 6 U.S. Government Financial Bailouts

    U.S. bailouts date all the way back to 1792. Learn how the biggest ones affected the economy.
  3. Home & Auto

    From Booms To Bailouts: The Banking Crisis Of The 1980s

    The economic environment of the late 1970s and early 1980s created the perfect storm for a banking crisis.
  4. Insurance

    Liquidity And Toxicity: Will TARP Fix The Financial System?

    TARP is the government's attempt to forestall a deep, extended recession. Will it work?
  5. Retirement

    Why Financial Advisors Disagree

    Financial advisors sometimes offer conflicting opinions that can be confusing for many investors.
  6. Active Trading Fundamentals

    The Fall Of The Market In The Fall Of 2008

    How did America's strong economy tumble so quickly? Find out here.
  7. Credit & Loans

    An In-Depth Look At The Credit Crisis

    The credit crisis reshaped the financial landscape and changed Wall Street forever. Find out how it happened.
  8. Personal Finance

    The Lost Decade: Lessons From Japan's Real Estate Crisis

    Find out what America can learn from Japan's liquidity trap and credit crunch.
  9. Entrepreneurship

    The Rise And Demise Of New Century Financial

    A case study in how poor planning toppled a subprime mortgage giant.
  10. Fundamental Analysis

    What are the most common issues with Serial Correlation in stocks?

    Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center