P1: OTA/XYZ P2: ABCc01 JWBT124-Ritholtz April 22, 2009 21:58 Printer Name: Yet to Come

Part I

A BRIEF HISTORYOF BAILOUTS

Source

: By permission of John Sherfﬁus and Creators Syndicate, Inc.

P1: OTA/XYZ P2: ABCc01 JWBT124-Ritholtz April 22, 2009 21:58 Printer Name: Yet to Come

Chapter 1

A Brief Historyof Bailouts

“The ultimate result of shielding men from the effects of folly is to ﬁll the world with fools.”

—Herbert Spencer, English philosopher

merica’s relationship with bailouts has been a complex andnuanced affair. It has evolved gradually, morphing through var-ious phases over time. The United States has had several distinctbailout eras, and each has seen an incremental shift in the attitudes to-ward government rescues. Philosophically, the country has moved fromﬁnding the mere idea of a government intervention to any corporationabhorrent, to begrudgingly accepting interventions as a rare but neces-sary evil. Since the late 1990s, bailouts have been embraced around theworld as a near-normal responsibility of government to save the ﬁnan-cial markets from themselves. Most recently, a backlash has been buildingagainst bailouts as a reward for dumb and irresponsible behavior.Let us consider an earlier period in U.S. history—the nineteenthcentury to the pre–Great Depression era. The popular attitude toward