Bailout (economy)

from Wikipedia, the free encyclopedia

As bailout (also bail out , English to bail out something , save some ' ) are in the economy , all financial measures in favor of by insolvency or over-indebtedness threatened economic agents . The opposite is bail-in .

etymology

Internationally, the term “bail-out” has become established for rescue operations. This goes back to the ransom of prisoners in the USA. Who by deposit ( English bail was released) from captivity, was considered etymological origin of "bail-out". Today, “bail-out” also means colloquially “to help someone out of a tight spot”.

General

The narrowing of the bail-out to the rescue of states as the "advocacy of other countries for the indebtedness of a state" is not economically justifiable. An economics lexicon even understands bailout as the "guarantee for the assumption of the national debt of one country by other countries ...". Rather, economic entities threatened with insolvency or over-indebtedness can be companies (such as Lehman Brothers ), states ( Greece ) or cities ( New York City ). Internationally, there is generally no special creditor protection for economically threatened economic subjects , so that in the worst case, their bankruptcy can be assumed. A bankruptcy disability is only in exceptional cases.

history

In the Middle Ages there were also bail-outs among private individuals . When Hans Brokes was unable to repay his debts to Hermann van Dome in 1585, his brothers-in-law helped him with a loan of 16,000 ML in 1594.

The IMF inventoried a total of 257 sovereign defaults between 1824 and 2004 . Kai Konrad has listed a total of 250 state bankruptcies since 1800 and since 1980 alone 90 bankruptcies from 73 states, some states have therefore gone bankrupt several times. Chile alone has been insolvent seven times, Brazil six times and Argentina five times. Of the EU member states , Austria , Greece , Portugal and Spain have been insolvent at least once since 1824 .

The social democrat Leo Arons helped his party comrade Karl Leuthner out of financial difficulties with a loan of 10,600 marks in 1910 . A striking example of the modern era was the first bail-out of New York City in August 1914, which is also considered the first example of systemic relevance ( English too big to fail , German  “ too big to fail ” ) in the American financial world. It all began with the closure of the New York Stock Exchange , which only reopened on December 12, 1914. The city was largely in debt in British pounds and was later no longer able to obtain the foreign currency for servicing the bond due to a lack of US dollars ; shortly before their bankruptcy, the US Treasury stepped in and arranged for the repayment. The city experienced a second rescue operation in December 1975 when, at the last minute, President Gerald Ford abandoned his initially negative attitude towards the city ( English drop dead , German  “let them drop dead ” ).

With the Federal Deposit Insurance Act (FDIA) in August 1950, received FDIC the right to bail out financial institutions to provide loans and equity capital ( English providing assistance ) if to maintain the stability of the financial system was necessary. However, this option was only used for the first time in 1969 and has only been used very rarely since then. In May 1984, the seventh largest bank in the United States, the Continental Illinois National Bank and Trust Company, was bailed out due to the FDIA.

Malaysia Airlines got into financial turmoil due to the Asian crisis , a rescue by the state took place in April 1998. In the government bankruptcies between 1998 and 2005 examined by the IMF, creditors had to write off between 13% ( Uruguay ), 73% ( Argentina ) and 82% ( Russia ) of their claims .

The beginning in August 2007 the global financial crisis triggered government measures to rescue the company crisis guessed large companies , but also for States. The immediate cause of the global financial crisis in the USA was the subprime crisis , during which the state mortgage banks Fannie Mae and Freddie Mac had to be saved from default by state funds in July 2008 . The biggest bank failure of Lehman Brothers in September 2008 triggered a shock in the financial markets around the world , especially as market participants assumed a rescue, so that interbank trading and the derivatives market collapsed completely. The US crisis brought a domino effect to Europe, where the Kaupthing Bank was placed under state control in October 2008 . The euro crisis that began to emerge from February 2010 affected the heavily indebted PIIGS countries Portugal , Italy , Ireland , Greece and Spain , which were even more indebted due to national bank bailouts. The most significant was the Greek sovereign debt crisis , which in May 2010 triggered rescue measures first by the IMF and then by the EU.

As a consequence of these financial crises , the euro rescue package was created in May 2010 , as part of which the ESM was founded in September 2012 , a financial institution intended for rescue measures. According to Art. 122 (2) TFEU , an EU member state which, as a result of exceptional events beyond its control, is faced with difficulties or is seriously threatened by serious difficulties, can be granted Union financial assistance. Nevertheless, includes non-assistance clause of Art. 125 TFEU, the responsibility of the EU and EU Member States for liabilities of individual Member States. The Covid-19 pandemic required massive government support measures from small and medium- sized businesses to large companies ( TUI , Lufthansa ) from March 2020 due to the extensive lockdown of public life .

Rescue operations

The focus of the rescue measures is on the debts of the threatened economic entity, so that a “bail-out” concentrates on this. Various instruments are available as rescue measures, which - depending on the effect on the threatened economic entity - can be classified as follows:

There are also rescue measures that have no direct impact on the amount of debt, but are intended to bring about a turnaround through organizational and / or business management measures , such as restructuring or reorganization .

economic aspects

It is part of the market economy that insolvent market participants as marginal providers have to leave the market through bankruptcy or liquidation . However, if they do not leave because they are being helped financially by third parties, it is a matter of market intervention in the market that is not dogmatically intended. However, it is politically and socially justifiable because the collapse would lead to contagion effects in the overall economy . Impending national bankruptcy is prevented either by the World Bank , the IMF or other states. Rescue measures in favor of banks or companies are usually only carried out if their states are of systemic importance. If states get themselves into the debt crisis through rescue measures in favor of banks or companies , the IMF or World Bank intervene. As Charles B. Blankart found, government support from banks reached a high proportion of a country's gross domestic product (GDP). While aid in Ireland reached 265% of GDP in 2008, it amounted to 80% in the USA and 23% of GDP in Germany. Therefore, bailouts have contributed significantly to the rise in national debt . Ultimately, states are the lender of last resort for companies, the IMF and the World Bank for states .

The status of Lender of Last Resort creates a moral hazard for states, large companies, large banks or insurers (also because of their systemic relevance) , because they can assume that they will be helped in a financial or corporate crisis. Any kind of guarantee, liquidity or capital aid creates a moral hazard. According to George Soros, the IMF is helping creditors with its financial packages and seducing them to act irresponsibly and making the international financial system more unstable.

Rescue operations are viewed critically because of the moral risk caused by the false incentive to take excessive risks and thus contribute to susceptibility to crises. For this reason, after the outbreak of the financial crisis from 2007 onwards , the issue of the orderly resolution of distressed credit institutions was also dealt with by the Financial Stability Board (FSB) on a global level from 2008 ; the dilemma between insolvency proceedings that are dangerous from a systemic point of view and their risk of contagion on the one hand and economically and politically questionable rescue operations on the other should be resolved with a new resolution regime for banks. In particular, it was demanded that the states should set up resolution authorities and equip them with instruments that enable the orderly resolution of financial institutions at no cost to the taxpayer; u. a. through the instrument of creditor participation , in which the creditors ( credit institutions , investment funds , suppliers , etc.) should be involved in the costs of crisis management for debtors in a corporate crisis . In the EU and the euro area , these principles were implemented in 2014 with the adoption of the European Banking Union .

See also

Web links

Individual evidence

  1. ↑ Thomas Plümper, Lexicon of International Economic Relations , 1996, p. 29
  2. ↑ Friedrich Heinemann, bailout and credit effects in the economic and monetary union , in: Journal of Business and Social Sciences (CFB) 115, 1995, pp 606 et seq.
  3. ↑ Michael Hohlstein, Lexikon der Volkswirtschaft , 2009, p. 84 f.
  4. ↑ Alexander Cowan, Sources and presentations on Hanseatic history , Volume 30, 1986, p. 120
  5. ↑ Focus Online of April 22, 2010, What Happens When Countries Go Bankrupt
  6. ↑ Kai Konrad / Holger Zschäpitz, Debt Without Atonement? , 2010, p. 178
  7. ↑ Scientific Advisory Board at BMWI, Overindebtedness and State Insolvency in the European Union , November 2010, p. 18 (PDF; 983 kB)
  8. ↑ IWK (ed.), International Scientific Correspondence on the History of the German Labor Movement , 1979, p. 460
  9. ^ William L. Silber, When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America's Monetary Supremacy , 2007, p. 49
  10. ↑ Christopher Riegger / Hal B. Heaton, Commercial Banking Regulation , Marriott School at Brigham Young University, 2007 PDF; 312 KB
  11. ^ Institute for Far Eastern Studies, Kyung Nam University (ed.), Asian Perspective , Volume 27, 2003, p. 93
  12. Jump up ↑ Aaron Smith, Bank of America has reached a $ 3 billion agreement with Freddie Mac and Fannie Mae to resolve a faulty mortgage loan dispute involving Countrywide Financial Corp. , 2011, p. 18
  13. ↑ Thomas Hartmann-Wendels , Low equity cover, insufficient transparency and false incentives , in: Wirtschaftsdienst 88 (11), 2008, p. 708
  14. ↑ Regulation (EU) No. 407/2010 of the European Parliament and the Council of May 11, 2010 on the introduction of a European financial stabilization mechanism
  15. ↑ Charles B. Bankard, the state - a "? Lender of last resort" , 2009, p 4
  16. Jump up ↑ Xavier Freixas / Curzio Giannini / Glenn Hoggarth, Lender of Last Resort , in: Journal of Financial Services Research 18 (1), 2000, p. 73
  17. ↑ George Soros, La crisis del Capitalismo Global , 1999, p. 212
  18. ↑ The new European rules for the restructuring and resolution of credit institutions. (PDF; 204 kB) In: Monthly Report June 2014. Deutsche Bundesbank, June 14, 2014, p. 31ff , accessed on August 18, 2018 .