Table: America's Biggest Bailouts
A bailout for the beleaguered airline industry wouldn't be the first time Washington has rescued a troubled company, industry--or municipality, for that matter. The precedents:
LOCKHEED AIRCRAFT, 1971
Beset by cost overruns, inflation, and lack of demand for a new jetliner, the L-1011, Lockheed Corp. asked Congress for support. The aerospace giant argued that should it fail, its demise would not only imperil the nation's defense and leave 60,000 workers unemployed, it would also ground commercial airlines that had paid Lockheed for future aircraft. After a contentious debate, lawmakers approved $250 million in loan guarantees. The turnaround was anything but smooth: Revelations that Lockheed had paid foreign bribes compelled the feds to oust two top execs and closely scrutinize Lockheed's activities.
NEW YORK CITY, 1975
A suburban exodus and a sharp decline in manufacturing jobs led to a broad erosion of New York's tax base in the early 1970s. By 1975, the city was broke, prompting New York Governor Hugh L. Carey to strip then-mayor Abe Beame of fiscal powers. The newly created Municipal Assistance Corp. took over New York's finances and, with the help of $1.65 billion in federal loan guarantees, implemented austerity measures that enabled the city to get back on its feet. New York repaid the loans by 1985.
PENN CENTRAL, 1976
Six years after the Penn Central Railroad filed for bankruptcy, the federal government combined parts of it with six other ailing Northeast railroads to form the nationalized Consolidated Rail Corp. The feds then spent roughly $7 billion to keep Conrail afloat. In 1987, with Conrail's recovery assured, the Reagan Administration sold the government's 85% stake. It was the largest initial public offering at the time. The government's take: $1.9 billion.
The Arab oil embargo caught Chrysler Corp. sitting on a mountain of debt as well as a huge inventory of gas guzzlers. President Jimmy Carter agreed in 1979 to provide up to $1.5 billion in loan guarantees, as long as Chrysler won $2 billion in concessions from banks, suppliers and unions. New CEO Lee Iacocca cut costs to the bone, eliminating 53,000 jobs. The company also cornered the booming minivan market. In 1983, the company paid off its loans seven years early, at a profit of $350 million to the government.
THE S&L INDUSTRY, 1989
An inflationary spiral forced thrifts to pay double-digit rates to depositors, while they were still largely dependent on 3% mortgages written in earlier times. New laws allowing them to engage in speculative real-estate deals also proved disastrous. By the time Congress addressed the crisis in the late 1980s, the tab for shuttering more than 1,000 ailing savings and loans had soared to $124 billion.