Chapter 4. Industrial-Era Bailouts (1971–1995)


When things are going well, the companies stress the idea of free enterprise, with no need for government regulation. But when things aren't going well, they suddenly become a close partner with the government and want it to bail them out. All they have to do is threaten to collapse and the government pours in more money.

 --A. Ernest Fitzgerald, civilian cost analyst and Management Systems Deputy to the Air Force Assistant Secretary for Financial Management

The previous era of government interventions focused broadly on emergency economic and prewar relief: Housing, jobs, finance, industrial production, and wartime preparation all received enormous aid.

The era that followed took a new and different path: bailouts of individual companies. This represented an enormous break from past philosophies, government activities, and use of taxpayer proceeds.

The year 1971 was a sea change in the history of American bailouts. That was the year when, for the very first time, the United States bailed out an industrial firm whose own financial mismanagement had driven it to the brink of extinction. The company was Lockheed Aircraft Corporation, and the bailout was in the form of loan guarantees worth $250 million.

Prior to the Lockheed rescue, the United States had never acted in loco parentis for any single firm. Previous rescue operations were intended to help the nation work through difficult times. During the Great Depression, one in four workers ...

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