A bailout is an attempt to control market conditions by an infusion of tax dollars into the market. Typically, a bailout refers to corporate bailouts, which is the transference of tax dollars to private corporations as a means of foregoing bankruptcy.
The primary function of a bailout is to improve the liquidity of currency throughout global credit markets, which allows banks and corporations to lend and encourages consumers to buy. Without adequate liquidity, however, banks and corporation cease lending to consumers and invariably to other banks.
Those who oppose bailouts, however, suggest that the practice interferes with the natural tendencies of market conditions, and rewards failed corporations with tax-payer dollars.
Conversely, those who support bailouts argue that they function as a necessary safeguard to prevent the systemic collapse of financial markets.
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