Bear Stearns got one. Lehman Brothers didn't. Life can seem unfair in the world of government bailouts. But decisions about who gets help from the government are based on circumstances and pressure generated by the political or financial crisis of the moment.
An overriding factor explains why The Bear Stearns Cos. Inc. won and Lehman Brothers Holdings Inc. lost: speed.
Bear Stearns suffered a sudden, massive heart attack that could have roiled a shocked and surprised financial industry. Until its collapse earlier this year, it was among the largest global investment banks and brokerage firms. The Bush administration felt immediate surgery was needed to prevent a meltdown.
Lehman Brothers was showing coronary symptoms for months, and there was time for the financial world to react. No surprise. No government triage.
Looking back, firms and industries bailed out by the government won help for many reasons: potential job losses, a wipeout of lifetime savings, the lifeline provided by airlines and the health of the financial system.
- After the Sept. 11, 2001, terrorist attacks, Americans still had to fly. Congress authorized $5 billion in cash to help shore up the airline industry, following up with $10 billion in loan guarantees.
- Jobs were at stake when Chrysler received loan guarantees in 1979 near the end of the Carter administration. The president and lawmakers in states with auto plants helped push through a package of $1.5 billion in loan guarantees while demanding concessions from labor unions and lenders.
- The government took control recently of the giant mortgage finance companies Fannie Mae and Freddie Mac to stabilize the housing market and prevent chaos in the nation's financial system. The key factor was that companies own or guarantee about $5 trillion in mortgage loans, about half the nation's total.
- The savings and loan industry was bailed out in the late 1980s. The U.S. financial system wouldn't have collapsed, but political pressure escalated from lawmakers whose constituents were losing their life's savings. President George H.W. Bush in 1989 authorized spending $166 billion over 10 years to close and merge insolvent savings and loan institutions.
- The effect on financial institutions led to the government brokering a $3.6 billion private bailout in the 1998 collapse of the Long-Term Capital Management hedge fund. But no government money was involved.
Other bailout recipients have included Lockheed Aircraft in 1971 and Continental Illinois bank in 1984.
"Bear Stearns took everybody by surprise; it looked like an imminent meltdown and you had to act quickly," said Alice Rivlin, vice chair of the Federal Reserve System's Board of Governors from 1996 to 1999. "Lehman had a lot of time to think about this. It had access to Fed liquidity pools and hadn't used them. It didn't look like a disorderly route. It looked like the process could be managed in an orderly way."
Another key difference between financial firm bailouts and those of other industries: jobs.
In the case of Chrysler, "It was a question of preserving jobs," Rivlin said. "Nobody has been worried about bailing out financial institutions to preserve jobs, although a lot of jobs are at stake."