Essay on Corporate Bailout and the Law

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The climax of the 2008-2009 financial crises, the largest ever since the Great Depression of the 1930s, witnessed the near collapse of multibillion-dollar industries in the United States. Concerns over the economic impact of the possible collapse of these industries compelled the then administration and Members of Congress to seek legislative options to salvage them. Consequently, two of the industry biggest players in the auto industries, General Motors and Chrysler, were offered financial support by the government and in return, shareholders and other stakeholders had to make necessary sacrifices in order to fundamentally restructure their businesses and commit to the tough decision of returning the companies to financial viability. In…show more content…
According to an analysis released by the Centre for Automotive Research (CAR) on December 9, 2013, the auto industry bailout generated an 8 to 1 savings. This means that for every dollar spent by the taxpayers, there was a return of close to eight dollars in savings. The reason for terming the bailout as a success is that it was successful in averting a wave of massive Chapter 11 filings that could have led to the wipe out of at least $280 billion in household income and a further $105 billion drained from the federal coffers as a result of a hike in demand for services like unemployment insurance (McAlinden and Menk, p.13). According to McAlinden and Menk, the authors of the research memo, the intervention of the government should be viewed as one of the most successful ones in the economic history of the United States (McAlinden and Menk, p.12). Basing on the economic modelling presented in the research memo, minus the bailout, it is clear that GM and Chrysler would have closed their operations permanently come January 2009. The consequences would have been catastrophic, as it would have meant that almost 600,000 retirees from the two companies would have seen a delay, a reduction in their pensions, and or a cancellation of their health benefits. Furthermore, many supporters of
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