Saving the Banks: The Political Economy of Bailouts

Emiliano Grossman () and Cornelia Woll ()
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Emiliano Grossman: CEE - Centre d'études européennes et de politique comparée (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique
Cornelia Woll: CEE - Centre d'études européennes et de politique comparée (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique

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Abstract: How much leeway did governments have in designing bank bailouts and deciding on the height of intervention during the 2007-2009 financial crisis? By analyzing the variety of bailouts in Europe and North America, we will show that the strategies governments use to cope with the instability of financial markets does not depend on economic conditions alone. Rather, they take root in the institutional and political setting of each country and vary in particular according to the different types of business-government relations banks were able to entertain with public decision makers. Still, crony capitalism accounts overstate the role of bank lobbying. With four case studies of the Irish, Danish, British, and French bank bailout, we show that countries with close one-on-one relationships between policy makers and bank management tended to develop unbalanced bailout packages, while countries where banks negotiated collectively developed solutions with a greater burden-sharing from private institutions.

Keywords: financial crisis; banking; lobbying; United Kingdom; Ireland; France; Denmark (search for similar items in EconPapers)
Date: 2014-03-01
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-02186491
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Published in Comparative Political Studies, 2014, 47 (4), pp.574-600. ⟨10.1177/0010414013488540⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-02186491

DOI: 10.1177/0010414013488540

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