Bank bail outs: causes, implementation, pros and cons

Abstract

This master’s thesis has explored the topic of main causes that provoked recent financial crisis transformed into global one and addressed the issue of bank bailouts application in the US that is becoming increasingly discussed and debated subject recently. This thesis has reviewed financial statements of four medium-sized commercial banks all located in Georgia state, two of which were allowed to fail and the others bailed out, in order to understand which specific features were taken into account by the US government to support a bank in difficult economic situation. The research concludes that despite high concentration of troubled assets in bank loan portfolio and lack of liquidity, well bank capitalization was one of the main points that helped banks to receive government support. The thesis is trying to show that despite high costs and negative consequences of bailouts, their implementation was inevitable to prevent the relapse of the Great Depression.