What is a bailout?

A bailout is when a business, an individual, or a government provides money and/or resources (also known as a capital injection) to a failing company. These actions help to prevent the consequences of that business's potential downfall which may include bankruptcy and default on its financial obligations.

Businesses and governments may receive a bailout which may take the form of a loan, the purchasing of bonds, stocks or cash infusions, and may require the recused party to reimburse the support, depending upon the terms.

Bailouts are typically only for companies or industries whose bankruptcies may have a severe adverse impact on the economy, not just a particular market sector. For example, a company that has a considerable workforce may receive a bailout because the economy could not sustain the substantial jump in unemployment that would occur if the business failed. Often, other companies will step in and acquire the failing business, known as a bailout takeover.

The US government has a long history of bailouts going back to the Panic of 1792. Since that time, the government has assisted financial institutions during the 1989 savings and loan bailout, rescued insurance giant American International Group (AIG), funded the government-sponsored home lenders Freddie Mac and Fannie Mae, and stabilized banks during the 2008 "too big to fail" bailout, officially known as the Emergency Economic Stabilization Act of 2008 (EESA).

Further, the financial industry is not the only one to receive rescue funds throughout the years. Lockheed Aircraft Corporation (LMT), Chrysler, General Motors (GM), and the airline industry also received government and other bailout support.

In 2010, Ireland bailed out the Anglo Irish Bank Corporation to the tune of €29.3 billion.

 Greece is not alone in needing outside help to manage debts. Other rescues include South Korea in 1997, Indonesia in 1999, Brazil in 1998, 2001 and 2002, and Argentina in 2000 and 2001.

Also, it is essential to understand, many of the businesses which receive rescue funding will eventually go on to pay back the loans. Chrysler and GM repaid their Treasury obligations as did AIG. However, AIG also received aid in ways other than merely financial, which is harder to track.

As you can see, bailouts take many shapes and forms. Also, with each new bailout, the record books are reopened and a new biggest recipient award updated. Consider some of these other historical financial rescues.

The US government offered one of the most massive bailouts in history in 2008 in the wake of the global financial crisis. The rescue targeted the largest financial institutions in the world who experienced severe losses from the collapse of the subprime mortgage market and the resulting credit crisis. Banks, which had been providing an increasing number of mortgages to borrowers with low credit scores, experienced massive loan losses as many people defaulted on their mortgages.

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