Fed Bailouts – Where Do They End?


Where is the end to the Fed’s willingness to bailout faltering businesses by nationalizing them and subjecting taxpayers to extensive risk? Unfortunately, in the current economic environment, there are countless major companies across the American economy whose business plans are faltering. Among those in serious trouble, are most of the airline companies, most of the automobile makers, countless financial institutions, many major retailers, and numerous others. It would be practically impossible and, indeed, foolhardy for the Fed to try to bailout all businesses that are suffering from current economic conditions. Unfortunately, the Fed has gone down a road that may lead to dire consequences in the future.

While arguments can undoubtedly be made regarding the importance of financial institutions and the broad impact they have on our economy, similarly compelling arguments can be made for various other major industries that are in serious trouble. For example, air travel has become a staple of modern life for most Americans. The ultimate failure of major airlines would result in the loss of hundreds of thousands of jobs and would have dire impacts on the economy as a whole. Not only the airlines themselves be impacted but business travel would be disrupted and local economies which cater to business and vacation travelers would be hurt, among others. Similarly, failure of major U.S. automakers would leave hundreds of thousands of people unemployed and would have a domino effect across many smaller business including parts manufacturers, distributors, repair workers, and others. How does the Fed deal with faltering businesses in these industries?

Unfortunately, as our country has evolved, major businesses and most small businesses have become so intertwined in their operations and financial well being, that any major company that fails will have a ripple effect across a broad segment of the country. The government and the American taxpayer simply cannot afford to save every major institution whose failure could have far reaching impacts.

The unfortunate aspect of this is that most of the burden of salvaging faltering institutions falls on the American taxpayers, while the companies and the managements that pursued poor business plans, took excessive risks, and reaped huge rewards in the short term, are left untouched. The press is full of articles about executives leaving companies with millions of dollars in their pockets after having promoted strategies that have resulted in the financial devastation of the companies they managed.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing clients with investment and insurance problems. For further information, please contact us.