June 27, 2012

Bank Bailouts Are Here to Stay

Garett Jones

Senior Research Fellow
Summary

There's no escaping the bailout because the politicians know we will always demand the bailout. When the next crisis comes, all the politician needs to hear is the whisper from an investment banker: "If we go down, so does the economy."

Contact us
To speak with a scholar or learn more on this topic, visit our contact page.

This article was originally published in U.S. News and World Report

As European Union leaders prepare for this week's summit to determine the next steps for easing the continent's financial crisis, Spain formally requested aid for its struggling banks today.

After years of promises that Europe (and the United States) would end bailouts someday, that someday is looking like the same someday when Dad is going to finally sober up. It's just another word for never.

Spain's likely bailout is yet another sign of a major change in the rich economies: Bank bailouts are with us forever. But, is the age of bank bailouts good news or bad news? It's great news for those who want government to provide safety nets; megabanks and their customers now have a durable safety net. I sleep better at night knowing my cash is stored at government-backed Citibank. However, it's bad news for those who want a more prosperous future. 

Continue Reading