What is a Bailout?
A bailout is financial help for ailing companies.
How Does a Bailout Work?
Company XYZ is in the newspaper industry and has seen a dramatic downturn in its advertising sales. The company's board believes that if it can launch an interactive digital version of its product, which has been in development for two years, it could become a viable business again.
Company XYZ publishes the only paper in the county, and Company ABC loves the newspaper. Company ABC agrees to lend Company XYZ enough loan at an interest rate below what Company XYZ could get anywhere else. Essentially, Company ABC gives Company XYZ a bailout.to launch the new digital product, and it prices the
Why Does a Bailout Matter?
Bailouts are essentially bankruptcies would cost what the government deems "too many jobs" or cause "too much" damage.intended to get companies out of trouble. Often, governments give bailouts to companies whose
Bailouts are a challenge to capitalism in its purest sense. Critics of bailouts argue, for example, that companies should be left to succeed and fail on their own merits, and that supply and demand in the free markets always determine the worth of goods and services. Supporters of bailouts argue that bailouts are sometimes the lesser of two evils when it comes to a company failing and displacing thousands of workers.