4 Other Bailouts in American History
By Greg Sabin
With all the money being thrown at banks, insurance companies, and car builders, many Americans have soured on the idea of bailouts. However, bailouts themselves are not always bad things. Let's look back at a few other occasions we threw money at problems.
1. Bailing Out the Boys in Blue: The Civil War Veterans Pension Program
The Civil War was the most destructive conflict in U.S. history. Millions of men returned from war injured or permanently disabled. What started as a disability fund for Union soldiers injured in the war became, by the end of the 19th century, a pension system for all veterans (other than Confederate veterans, that is) in their old age. In 1894, with the still relatively small scope of government spending and the huge amount of qualified veterans and widows, the $165 million spent in Civil War pensions was more than one third of all federal spending. The widow payouts were so generous that older vets were able to attract young wives looking for financial support. This practice was so prevalent that there were widows collecting these pensions up until (at least) 1999!
2. A Robber Baron Bails Out Wall Street
The Panic of 1907 left American banks on shaky ground and the stock market in a free fall. At the time, there were no central banks in place, so the federal government had no means of bailing out businesses or injecting cash into the economy. It just stood by, idly waiting for a hero to save the day. Amazingly, one did."¨"¨ James Pierpont Morgan, with his frightening eyebrows and permanent scowl, almost single-handedly rescued the American economy. He propped up many of the failing banks in New York by twisting the arms of other financiers to make them cough up some capital, and he assuaged investors' fears by backing up the market with his own vast cash reserves. Before long, Wall Street was on the mend."¨"¨
3. America Bails Out Europe: The Marshall Plan
Europe was a wreck after WWII. Entire cities had been leveled, communities destroyed, and spirits crushed. With the looming specter of Soviet communism and the potential for radical movements to step in where legitimate governments had failed, throwing a little U.S. cheddar at the problem didn't sound like such a bad idea. In fact, it turned out to be a swell idea for Europeans and Americans alike, for while money flowed into war-torn countries like Germany, France, and the Netherlands, much of that money returned to American pockets as U.S. exports flowed out in record numbers to the rebuilding nations. Plus, the plan's primary architect, General George Marshall, got a Nobel Peace Prize out of the deal.
4. Bailing Out the Big Apple
In the early "˜70s, New York City was basically bankrupt. After years of pleading with the Federal government, NYC got its wish in the form of the New York City Seasonal Financing Act. Guaranteeing over $2 billion in loans, the act wasn't the only thing that saved the city. Many of the city's workers also pitched in, with municipal and teacher's pension plans throwing in a couple billion of their own. When it all came out, everyone, including the fed, got their money back plus interest, and now New York no longer has that creepy French Connection feel to its streets.