Government Bailouts - Essay Example

If the government does not intervene and does not provide financial assistance to the financially unstable large corporations, unemployment and other related problems would further aggravate an economy. Already, the economy of United States of America is facing very severe and harsh waves of financial crisis, which showed their presence in the year of 2007 and they continued till the end of 2009. History of bailouts The finance history has sufficient record about the events of government bailouts.

In the year of 1979, Chrysler had lost $ 1.1 billion. At that time, it was feared that this could negatively hit the entire US automotive industry. In order to avoid the subsequent impacts of this loss of Chrysler, the Feds had no option except to intervene and save the corporation. Instantly, in the year of 1980, the Chrysler Loan Guarantee Act was discussed, approved and passed. In this Act, Chrysler was given a loan of $1.5 billion by the federal government (Gup, 4). Furthermore, in the year of 1989, savings and loan institutions became financially crippled.

The failure of these savings and loan institutions was considerably spreading almost all companies working in this industry. At that time, then President George H.W. Bush and his Government were required to devise and determine a bailout plan to address and stop falling this entire industry. Consequently, The President Bush and Congress passed a bill and made it as the Financial Institutions Reforms, Recovery, and Enforcement Act in the year of 1989 (Rehm). But, this government bailout was only limited to save the savings and loan institutions.

In the year of 2001, United States of America was attacked with some deadly terrorist attacks on many cities. In which, the terrorists used aeroplanes to carry out the attacks on the land of America. Due to the use of aeroplanes, the entire airline industry became a subject of economic and financial crisis. These financial crises became so severe that the Government had no other option except to play the role of saviour. As a result, the then President Bush discussed the issue with the Congress.

And this discussion brought a bill and that bill was passed as the Air Transportation Safety and Stabilization Act. This Act mentioned some fundamental steps necessary to rescue the entire airline industry. The Act released $5 billion compensation and an additional amount of $10 billion in loan guarantees (Rehm, Barbara &Mandaro). The year of 2007 and 2008 were worst of all. The onslaught of financial crises was uncontrollable and heavily damaging the economy of America. In October 2008, Congress passed the Emergency Economic Stabilization Act.

This Act authorised the Treasury Department to spend the amount of $700 billion for the purpose of handling and tackling the problem of financial crisis of 2008. Government bailouts are not a wish but a necessity on the part of government. The government has no choice but to intervene and play the role of saviour. No government ever wants to use its own funds and money to provide financial assistance or extend a loan to a corporation under normal financial circumstances. Rather, the government ensures that the corporation must and should be financially well-equipped and financially strong enough to meet its expenses and its other financial and non-financial obligations.

But, due to a variety of economic and political factors some corporations become unable to continue doing business