The U.S. government has a long history of leading economic bailouts. The first major intervention occurred during the Panic of 1792 when Treasury Secretary Alexander Hamilton authorized purchases to prevent the collapse of the securities market.

When private enterprises are in need of rescue, the government isꦜ often ready to prevent their ruin. In this article, we look at six instances over the past century that have necessitated government🅷 intervention:

• The Great Depression
• The Savings and Loan crisis
• The conservatorship of Fannie Mae and Freddie Mac
• The collapse of Bear Stearns
• The rescue of American International Group (AIG)
• The COVID-19 pandemic

The Great Depression

The 澳洲幸运5开奖号码历史查询:Great Depression is the name given to the prolonged economic decline and stagnation precipitated by the 澳洲幸运5开奖号码历史查询:stock market crash of 1929.

Following the presidential election of Franklin D. Roosevelt in 1932, the government enacted a number of precedent-setting rescue programs designed to provide relief to the nation's people and businesses.

When Roosevelt took office in 1933, the 澳洲幸运5开奖号码历史查询:unemployment rate neared 25%. Countless A𝕴mericans who lost their💛 jobs also lost their homes. The population experiencing homelessness grew, especially in urban areas.

To keep people in their homes, the government created the Home Owners' Loan Corporation, which bought defaulted mortgages from banks and refinanced them at lower rates.

The program helped more than one million families benefit from lower rates on refinanced mortgages. Because there was no 澳洲幸运5开奖号码历史查询:secondary market, the government held the mortgages until they were paid off.

Government-Backed Programs

The government created a number of other programs to help the nation weather the Great Depression. While these initiatives were not bailouts, strictly speaking, they provided money and support to ♊create tens of thousands of new jobs, principally in public works. Some of these projects included:

• Building the Hoover Dam
• Repairing roads and bridges and building new ones where needed
• Constructing new post office buildings around the country
• Hiring artists to paint murals at the new post offices
• Hiring writers to author state guidebooks
• Providing price supports and 澳洲幸运5开奖号码历史查询:subsidies for farmers

Armed with a steady income, millions of re-employed workers began purchasing again and the economy recovered slowly. By 1939, as World War II broke out in Europe, the Great Depression was beginning to loosen its grip on the economy.

When the U.S. entered the war after the bombing of Pearl Harbor in 1941, the great economic recovery was already underway, and it would culminate in the post-war boom of the 1950s.

The Savings and Loan Bailout of 1989

Savings & Loan institu🍰tions (S&Ls) ꦡwere originally created in the 19th century to provide mortgages to homeowners. S&Ls helped spur the housing boom that followed the end of World War II.

Flush with funds, numerous S&Ls ventured into risky and ill-advised commercial real estate ventures. Also, rising interest rates meant S&Ls were paying more interest on deposits than what they collected on fix🦂ed-rateꦿ loans.

Many were insolvent by the early 1980s, but customers kept banking with them because they knew their deposits were insured. In addition, regulators allowed 澳洲幸运5开奖号码历史查询:zombie banks to continue operating in hopes they would eventually return to profitability.

By 1986, approximately 1,000 S&Ls that were still in operation were insolvent or nearly insolvent. Loan defaults ran into the billions, and bil🍸lions more were spent to cover federally insured deposits.

Congress took several measures to address the crisis, such as passing the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and creating the 澳洲幸运5开奖号码历史查询:Resolution Trust Corporation to sell off assets. Between 1986 and 1995, the government spent an estimated $160 billion (in 1990 dollars) cleaning up the savings and loan mess.

The 2007-2008 Financial Crisis

The 澳洲幸运5开奖号码历史查询:2007-2008 financial crisis resulted in an unprecedented federal intervention to rescue banks and restore confidence to the finance sector. The chief reason for the crisis was the implosion of 澳洲幸运5开奖号码历史查询:mortgage-backed securities (MBS) ⭕and the collapse of the hꦐousing market that threatened many companies with insolvency.

In the early days of the crisis, no one knew which companies were holding toxic assets and which would be next to falter. Lack of trust spread, with market participants unwilling to take on 澳洲幸运5开奖号码历史查询:counterparty risk. As a result, companies couldn't access credit to meet their 澳洲幸运5开奖号码历史查询:liquidity needs.

To address the crisis, Congress passed the ▨澳洲幸运5开奖号码历史查询:Emergency Economic Stabilization Act o⛦f 2008. The act created the 澳洲幸运5开奖号码历史查询:Troubled Asset Reli♑ef Program (TARP), which authorized the U.S. Department of the Treasury to buy up to $700 billion in toxic assets from companies, which could then replenish their balance sheets with safer assets.

The Treasury Department was also authorized to buy up to $250 billion in bank shares, which would provide much-needed capital to financial institutions.

It bought $20 billion in shares each from Bank of America (BAC) and Citigroup (C). The Treasury Department later sold those shares back for a profit. In total, the government provided $245.1 billion in TARP assistance to banks and recouped $275.6 billion, for an investment gain of $30.5 billion.

Fannie Mae and Freddie Mac

The collapse of the housing market also brought trouble to 澳洲幸运5开奖号码历史查询:Fannie Mae and Freddie Mac, two 澳洲幸运5开奖号码历史查询:government-sponsored enterprises charged with 🌺promoting homeownership by providin💦g liquidity to the housing market.

Fannie and Freddie play a vital role in the housing market by purchasing mortgages from lenders and guaranteeing loans. Congress authorized the creation of Fannie Mae during the Great Depression and Freddie Mac in 1970.

In 2008, at the height of the financial crisis, Fannie and Freddie held obligations on $1.2 trillion in bonds and $3.7 trillion in mortgage-backed securities. Deterioration in their finances meant neither could service their obligations.

This forced the 澳洲幸运5开奖号码历史查询:Federa🥃l Housing Finance Agency (FHFA), which regulates Fannie and Freddie, to put both into 澳洲幸运5开奖号码历史查询:conservatorship.

To keep both solvent, the Treasury Department provided $119.8 billion to Fannie Mae and $71.7 billion to Freddie Mac in exchange for senior preferred stock.

This required Fannie and Freddie to pay dividends to the government ahead of all other shareholders. Fannie Mae paid $181.4 billion in dividends to the Treasury Department, while Freddie Mac paid $119.7 billion, through September 2019.

The lifeline extended by the Treasury Department gave both time to clean up their finances. The two reported losses between 2007 and 2011, returning to profitability in 2012. In 2023, Fannie Mae reported $17.4 billion in earnings, while Freddie Mac reported $10.5 billion.

Bear Stearns

Mortgage-related losses took an enormous toll on 澳洲幸运5开奖号码历史查询:Bear Stearns, an investment banking firm and brokerage founded in the 1920s. They pr🐽ompted the Federal Reserve to step in to෴ prevent its collapse in 2008.

Bear Stearns—like Bank of America, Citigroup, and AIG—was deemed 澳洲幸运5开奖号码历史查询:too big to fail. Its collapse, it was feared, posed systemic risks to the market. The Federal Reserve brokered a merger between Bear Stearns and JPMorgan Chase. To facilitate the deal, the Fed provided a $12.9 billion bridge loan, which was repaid with interest.

The Fed then lent $28.82 billion to a Delaware limited liability company created to buy financial assets from Bear Stearns.

This corporation, Maiden Lane, then repaid the Fed interest and principal using proceeds from the sale of those assets. This was accomplished by November 2012. It sold all remaining securities in September 2018, generating net gains of approximately $2.5 billion.

The American International Group (AIG)

During the 2007-2008 financial crisis, the government took control of 澳洲幸运5开奖号码历史查询:American International Group (AIG) to prevent the fifth-largest insurer in the world from going bankrupt. AIG had faced steep 澳洲幸运5开奖号码历史查询:derivative ♏losses, and the Federal Reserve was worried its failure could severely disrupt financial markeꦕts.

The Federaﷺl Reserve and Treasury Department provided $141.8 billion in assistance in exchange for receiving 92% ownership of the company.

The government earned a $23.1 billion profit as a result of the bailout. AIG paid $18.1 billion in interest, dividends, and capital gains to the Fed. In addition, the Treasury netted $17.55 billion in capital gains.

However, about $12.5 billion in assistance provided under TARP was not recovered, resulting in a net gain of $23.1 billion for the government.

The COVID-19 Pandemic

Perhaps the most staggering example of a government bailout was the r♚esponse to the COVID-19 pandemic, which led to a severe contracti꧋on in economic activity and employment as people all over the world stayed home to curtail the spread of the disease.

On March 27, 2020, President Donald Trump signed the Coronavirus Aid, 🔯Relief, and Economic Security ဣ(CARES) Act, which provided more than $2 trillion in assistance. This included 澳洲幸运5开奖号码历史查询:stimulus check payments of $1,200 per adult and $500 per dependent child.

Another round of stimulus payments of $600 per qualifying adult and per dependent child was allocated as additional assistance funds at the end of 2020.

Not even a year later, on March 11, 2021, President Joe Biden signed the American Rescue Plan Act into law, which delivered a third stimulus check of $1,400 for qualifying adults and each of their dependents.

The 澳洲幸运5开奖号码历史查询:American Rescue Plan, totaling $1.9 trillion, extended and/or amended many of the provisions included in the CARES Act, including a pause on federal student loan interest and a supplementary weekly unemployment benefit of $300.

Other measures included the 澳洲幸运5开奖号码历史查询:Paycheck Protection Program, which funneled more than $500 billion to companies through the 澳洲幸运5开奖号码历史查询:Small Business Administration to keep workers on the payrolls.

Meanwhile, the Federal Reserve provided liquidity to financial markets by expanding its 澳洲幸运5开奖号码历史查询:balance sheet by $3 trillion. 

The Bottom Line

澳洲幸运5开奖号码历史查询:Can the U.S. government continue to bail out troubled businesses such as Bꦫear Stearns and AIG and government-backed institution♛s such as Freddie Mac and Fannie Mae?

Many economists say no. The U.🐲S. has run up trillions of dollars in debt and may not have the resources to fund huge bailouts in the 🐷future.

Economics can be unpredictable, and no one can say what the f♏uture will bring in an ever-changing world in🐼 which the economies of emerging nations—especially China and India—can have major impacts on the U.S.

But with new regulatory legislation and more vigilant oversight, bailouts of the magnitude that characterized thꦦe rescues of 2008 could be less necessary unless, of course, some exogenous event such as a pandemic strikes again.