AgentMortgage

Americans rush to judgment on ‘bailout’

Too many assume feds protect 'big guys' only

Whenever government is involved in a program to assist a private firm in trouble, much of the press reports it as a "bailout." Back in the 1980s when the savings and loan industry was in trouble, the operations of the Resolution Trust Corporation (RTC), which the federal government chartered to manage and liquidate the assets of failed associations, were frequently, yet erroneously, described in this way, and they still are. For readers who don't bother absorbing the details, the term "bailout" suggests that everybody connected to the troubled enterprise is being rescued, including those who were responsible for its plight. For this reason, it often generates a hostile public response -- "one more example of how government protects the big guys." Until very recently, a core if unstated principle of federal government intervention since the 1980s has been that the shareholders of the firms involved lose all or most of their investment, and that s...

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