Bailout

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A bailout involves an injection of liquidity (capital) into a failing company or bank to prevent it from going under. This liquidity often comes from the government or a group of investors. A government bailout, or rescue package, is usually undertaken only when the authorities believe that allowing the business to collapse could have wide-ranging destructive consequences on the economy. In these instances the bank or company is often referred to as "too big to fail." The government's policy to bail out very large and established corporations is controversial, as it raises the issue of moral hazard.

For information on the 2008 U.S. government bailout of various financial institutions, see:

Troubled Asset Relief Program


References