Bailout Nation: How Greed And Easy Money Corrupted Wall Street And Shook The Real Economy By Barry Ritholtz By Aaron Task Publisher: Wiley Price: $24.95

If there was an award for the most popular and expensive word of the year, in 2008 ‘bailout’ would have been a serious contender, if not the winner, especially in the US. The word, however, is not entirely new for the capitalist American society. In the later years of World War II, anticipating its entry into the war, the US government assisted various strategic industries that were otherwise in shambles due to the Great Depression. Many, however, don’t consider this a bailout; it was a buildup for national defence.

A few decades later, ‘bailout’ formally entered the American dictionary. In 1971, for the first time, the US government came to the rescue of a company, Lockheed Aircraft Corporation, and in 1979 it wrote a cheque for Chrysler.

The bailout train, with some more stoppages, reached the year 2008, where it not only broke the rules of capitalism, but, for some observers, challenged its very existence.

Barry Ritholtz has beautifully documented the history of bailouts in the US, their causes, and effects and side effects in Bailout Nation.

The author, a Wall Street professional and a financial blogger, is disappointed with the current culture of bailouts, and understandably so. “Eat what you kill” is the rule on Wall Street and some companies getting handouts from the government goes against this.

Although the book is critical of bailouts, the reader starts getting two different pictures in its later parts. One is of a bailout of a firm in the real economy, which, in principle, is unacceptable in a capitalist system. The other is of financial institutions in the middle of a crisis.

The need, perhaps, is to bring appropriate levels of regulation back into the financial system

There is no doubt that bailouts create moral hazards. But the question is: do we want to save capitalism without capital? The collapse of Lehman Brothers showed us how interconnected we are. What if AIG had gone under the very next day, and maybe Citi a few days later? It’s difficult to even take a guess as to where the world would have stopped.

Therefore, it’s important to segregate financial and non-financial institutions and the circumstances.

The need, perhaps, is to bring appropriate levels of regulation back into the financial system, which, as highlighted in the book, were removed one by one in the past.

In conclusion, the book deals with an issue that will always attracts diverse views and you may disagree at times. Apart from this, it is complete in itself and undoubtedly an interesting read.