Privatizing Profits And Socializing Losses

Definition of 'Privatizing Profits And Socializing Losses '


A phrase describing how businesses and individuals can successfully benefit from any and all profits related to their line of business, but avoid losses by having those losses paid for by society. Privatizing profits and socializing losses suggests that when large losses occur for speculators or businesses, they are able to successfully lobby government for aide rather than face the consequences of said losses.

Investopedia explains 'Privatizing Profits And Socializing Losses '


The biggest example of privatizing losses and socializing losses came during the TARP bailouts of 2008-2009 in which the United States government bailed out numerous banks, insurers and auto manufacturers after they had sustained huge losses in their business dealings, in some cases through unacceptable risk tasking and lack of due diligence.


Filed Under: ,

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an 80% loan-to-value ratio, the second position lien has a 10% loan-to-value ratio and the borrower makes a 10% down payment. 80-10-10 mortgage transactions are piggy-back mortgage transactions, and are frequently used by borrowers to avoid paying private mortgage insurance.
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as a SPDR. Unlike actively managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another market so that it balances out. So when examining a specific market, if all other markets are in equilibrium, Walras' Law asserts that the examined market is also in equilibrium.
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction.
Trading Center