Government Bailouts: Necessity or a Waste?

Government Bailouts: Necessity or a Waste?

What was the purpose of giving bail out money to Wall Street and big businesses? Did the bail outs make a positive impact on our economy? Has it helped unemployment? Did the government do what was best for Americans or just for big corporations? Are there any other solutions that the government could have taken? This paper will debate these questions and maybe shed some light on what is really happening, or should be happening with our tax dollars. I have done a lot of research on the bailouts given to corporations from our tax dollars, and in this report I will elaborate in depth on where the money was spent and if they were just throwing good money after bad and then add an alter solution I think could have worked.

Whenever things begin to show signs of decline on Wall Street and within big corporations, so many panic and immediately ask the government to start to bail them out instead of trying to figure out what is going wrong and fix it before things get way out of hand. America was built on determination and hard work, and now most take the easy way out and expect the government to do everything for them, and pick them up when they fall. We are slipping into a complacent way and expecting to be taken care of as if we were infants with their mothers.

American history has seen many government bail outs, fourteen sizable ones in the past forty years alone, some of the companies has turned around and others not so much. In 1970 the Penn Central railroad was one of the major corporations in the early seventies that was going broke and asked the government for help, stating they are a crucial provider of transportation for the national defense, Congress refused them money even though the Nixon administration and the Federal reserve supported the idea, making them have to figure out why they are failing and fix it on their own; They were on the brink of bankruptcy. Later that same year Penn Central railroad filed for bankruptcy which freed them from all of their commercial paper obligations, which meant the banks they owed were not getting the money back that was lent or owed to them. After the bankruptcy of Penn Central there began a ripple effect of money market downfalls and was alarming to the Federal Reserve board in which they decided to provide the reserves that was needed to reach the credit needs of their customers. The government then provided just over six hundred and seventy six million dollars in loan guarantees to pay off Penn Centrals debt. After that the government consolidated the still struggling Penn Central with five other struggling rail ways and spent even more money (in the billions) to help the consolidation out of debt, now they are prospering and renamed themselves as Conrail. The government finally sold Conrail making all of their money back with an additional five hundred and seventy nine million dollars in dividends.

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