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History of U.S. Gov't Bailouts

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  • Greg Cannon
    http://www.propublica.org/special/government-bailouts History of U.S. Gov t Bailouts September 19, 2008 6:33 pm EDT With the flurry of recent government
    Message 1 of 1 , Sep 20, 2008

      History of U.S. Gov't Bailouts

      September 19, 2008 6:33 pm EDT

      With the flurry of recent government bailouts--and a much larger one likely on the way--we decided to try to put them in perspective. The circles below represent the size of U.S. government bailout, calculated in 2008 dollars. They are also in chronological order.

      Industry/Corporation Year What Happened Cost in 2008 U.S. Dollars

      ● Penn Central Railroad 1970 In May 1970, Penn Central Railroad, then on the verge of bankruptcy, appealed to the Federal Reserve for aid on the grounds that it provided crucial national defense transportation services. The Nixon Administration and the Federal Reserve supported providing financial assistance to Penn Central, but Congress refused to adopt the measure. Penn Central declared bankruptcy on June 21, 1970, which freed the corporation from its commercial paper obligations. To counteract the devastating ripple effects to the money market, the Federal Reserve Board told commercial banks it would provide the reserves needed to allow them to meet the credit needs of their customers. $3.2 billion

      ● Lockheed 1971 In August 1971, Congress passed the Emergency Loan Guarantee Act, which could provide funds to any major business enterprise in crisis. Lockheed was the first recipient. Its failure would have meant significant job loss in California, a loss to the GNP and would have impacted national defense. $1.4 billion

      ● Franklin National Bank 1974 In the first five months of 1974 the bank lost $63.6 million. The Federal Reserve stepped in with a loan of $1.75 billion. $7.7 billion

      ● New York City 1975 During the 1970s, New York City became over-extended and entered a period of financial crisis. In 1975 President Ford signed the New York City Seasonal Financing Act, which released $2.3 billion in loans to the city. $9.4 billion

      ● Chrysler 1980 In 1979 Chrysler suffered a loss of $1.1 billion. That year the corporation requested aid from the government. In 1980 the Chrysler Loan Guarantee Act was passed, which provided $1.5 billion in loans to rescue Chrysler from insolvency. In addition, the government's aid was to be matched by U.S. and foreign banks. $3.9 billion

      ● Continental Illinois National Bank and Trust Company 1984 Then the nation's eighth largest bank, Continental Illinois had suffered significant losses after purchasing $1 billion in energy loans from the failed Penn Square Bank of Oklahoma. The FDIC and Federal Reserve devised a plan to rescue the floundering bank that included replacing the bank's top executives. $9.5 billion

      ● Savings & Loan 1989 After the widespread failure of savings and loan institutions, President George H. W. Bush signed and Congress enacted the Financial Institutions Reform Recovery and Enforcement Act in 1989. $293.8 billion

      ● Airline Industry 2001 The terrorist attacks of September 11 crippled an already financially troubled industry. To bailout the airlines, President Bush signed into law the Air Transportation Safety and Stabilization Act, which compensated airlines for the mandatory grounding of aircraft after the attacks. The act released $5 billion in compensation and an additional $10 billion in loan guarantees or other federal credit instruments. $18.6 billion

      ● Bear Stearns 2008 JP Morgan Chase and the federal government bailed out Bear Stearns when the financial giant neared collapse. JP Morgan purchased Bear Stearns for $236 million; the Federal Reserve provided a $30 billion credit line to ensure the sale could move forward. $30 billion

      ● Fannie Mae / Freddie Mac 2008 The near collapse of two of the nation's largest housing finance entities was yet another symptom of the subprime mortgage and housing market crisis. In an effort to prevent further turmoil within the financial market, the U.S. government seized control of Fannie Mae and Freddie Mac and guaranteed up to $100 billion for each company to ensure they would not fall into bankruptcy. $200 billion

      ● American International Group (A.I.G.) 2008 When AIG was unable to secure a private-sector loan, the federal government intervened by seizing control of the insurance giant. $85 billion

      Jesse Nankin, Eric Umansky, Krista Kjellman, Scott Klein
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