Should government really bailout companies?I think if government pulls a company out of a financial quagmire then the message going out to other companies is that they can mess big time and...

Should government really bailout companies?

I think if government pulls a company out of a financial quagmire then the message going out to other companies is that they can mess big time and government would be their knight in shining armour.Isn't government supposed to prevent this from happening in future?I surely would not like my tax money being spent it like this.If you aren't as magnanimous as I think then I am sure you would not also like what government is doing.

If your opinion differs from mine then please provide me your side of opinion.

Expert Answers
Susan Hurn eNotes educator| Certified Educator

The rationale for bailing out the companies that received federal funds was that these companies were simply too big to fail, that their failures would plunge the entire American economy, and then the world economy, into a catastrophic disaster. Spell that "depression," not recession. What I've read suggests that economists behind the scenes were truly and deeply shaken by the circumstances at that time and where we were headed. We will never know what would have happened had these companies not been rescued, but if the country had been plunged into a depression, almost everyone would have suffered, and many simply would have been destroyed.

I think most people agree that the bailouts, especially the immediate first round, were not handled well at all. Strings were not attached, and conditions were not imposed. Accountability was not put in place. Consequently, we then learned of one outrage after another taking place within companies that should have at least been respectful and appreciative of the money the American people loaned to them. Greed and arrogance!

I think the government was right to act in order to avoid economic catastrophe for the entire country, but the execution of the bailouts was inept, at first, before it got better. Recently, banks have begun to pay back money borrowed. They want to get out from under the new restrictions placed upon them. So far the government has earned four billion dollars in interest on money that was loaned to banks. The real lesson in regard to the bailouts is this--a bank or company that is "too big to fail" is too big, period. It was the lack of reasonable and appropriate government regulation and oversight that allowed this entire debacle to happen.

drmonica eNotes educator| Certified Educator

I have strongly conflicting feelings on the bailout issue. On the one hand, I understand the economic interdependence of all stakeholders on the financial health of the banking industry. Health financial services institutions benefit everyone. Nevertheless, I saw on the ABC Evening News today that the average CEO annual compensation since the bailout was over $13 million. This figure was compared to the $31,000 average annual pay of the rank and file taxpayer, who funded the bailout. It also seems unfair that executives who helped create the financial mess benefited financially from the bailout while laying off lesser-paid employees. The news showed that the CEO pay, combined, would have funded 66 weeks of unemployment compensation for the banking employees who were laid off after the bailout.

Ashley Kannan eNotes educator| Certified Educator

I think you hit on a very strong note about the resentment towards bailouts.  Yet, to provide the counterargument, I think that the bailout of these particular businesses were not merely for them, but for the workers or individuals who would have been irreparably destroyed on many levels if the company for which they worked had been denied assistance.  While companies and businesses might have made unintentional and deliberate miscalculations, there is little reason why a worker who toils for an hourly wage has to pay the price for bankruptcy while the CEO walks away with millions.  The bailouts, though unpopular, could be argued were enacted for the millions of individuals whose economic viability was contingent on these organizations being financially supported.

litteacher8 eNotes educator| Certified Educator
I actually agree with you. If the government had not bailed out the big banks, whose corruption and greed tanked our economy, things might be worse. I do not think that bailing out the banks solved anything. I think the best metaphor is a spoiled rich kids whose parents keep bailing him out of trouble. If there are never any consequences, or they profit from their wrongdoing, they will not stop.
krishna-agrawala | Student

A company serves the interests of many people other than the owners and shareholders of the company. Two most important of these groups are the employees and the consumers. The bailout of a company is justified on the basis of protecting the interest of the employees and the consumer. Just think of a situation if the company that supplies electricity to your house, what would you support - shutdown of the company and your power supply, or bailout of the power company.

Of course, the bailout package should not reward the management or owners of the company disproportionately.