There is something puzzling about "bailout" --- the term, not
the practice. The word is a euphemism. Nothing is literally bailed
out; rather, money is given to people for a screw-up. That's not
necessarily a bad thing. All of us screw up and can use a little
help sometimes. Moreover the victims of a screw-up are not always,
or even usually, the people who screwed up. Nonetheless, paying
people for screw-ups sounds like a bad idea, so a euphemism is
necessary. The puzzle is that everyone hates bailouts, which makes
it a poor choice of euphemism. There are plenty of popular
alternatives: rescue, disaster relief, victim aid, and catastrophe
insurance, for examples. If you want government money for your
friends, why not use one of these terms instead of "bailout"?
The reason is the object. If you rescue, relieve, aid, or insure X,
X is the one who gets the help. But if you bail out X, Y gets the
help, and Y doesn't appear in the sentence. Despite its
unpopularity, "bailout" is a useful term, because it conceals the
beneficiary. If you want money for an unpopular Y, it's better to
use an unpopular verb, "bail," attached to a popular object, than
to attach a popular verb to your unpopular client. So whenever you
hear "bailout," ask not for whom the bail tolls; ask who tolls the
For example, Steven Rattner, who administered the auto bailout,
recently called for a bailout of Detroit
. His specific plan was for the state of Michigan to pay $1.25
billion to retired Detroit city workers (technically, he called for
the state to pay for reinvestment in Detroit infrastructure and for
Detroit to take the same amount out of infrastructure investments
and pay it to retirees, but that's a obvious shell game). While
this formulation required him to admit to advocating bailout, it
allowed him to make the object "Detroit" rather than "retired city
While the plight of municipal workers with underfunded pensions is
serious and may merit state or federal aid, no one would argue
openly for an assessment on Michigan taxpayers to pay specifically
Detroit retirees, especially with no systemic reforms attached.
Moreover, the proposal has nothing to do with any recent news from
Detroit. Clearly Rattner is taking advantage of the news of
Detroit's bankruptcy and the tricky grammar of "bailout" to plead a
special case by subterfuge.
Similarly, the auto bailout was not about saving
) or Chrysler. Both companies went bankrupt despite the government
money, and this came as no surprise to anyone. Both companies
survived in restructured form, which they would have done without
the bailout. The point of the bailout was to change the
distribution of proceeds to the various stakeholders -- for
example, favoring unions over financial creditors, cars with
foreign-made parts and US nameplates over cars with US-made parts
and foreign nameplates, environmental goals over investors, and, of
course, todo el mundo over taxpayers. Whether these things were
good or bad policies, none would have been accepted by voters as
either wise or fair had they been legislated openly. Thus it was
worth accepting criticism for bailing out GM and Chrysler, to avoid
criticism from forcing financial creditors to rescue unions, the US
domestic auto parts industry to relieve the US domestic car
nameplate industry or creditors to aid the environment.
In the Wall Street bailout, the government did not save
). Control of all these firms passed to others, and the surviving
parts are shadows of their former selves. The government saved the
shareholders and managements of creditors of these institutions.
Again setting aside the question of whether this was a good idea,
it is indisputable that the government went to great lengths (which
were eventually ruled to be illegal lengths) to hide the identities
of the eventual recipients, and that there was considerable public
anger when the information came to light.
The reason "bailout" can be used in such sneaky ways is that it has
no known etymology, or rather, several undocumented etymologies.
The most obvious is to "bail" water out of a boat (from the word
for a small wooden bucket used for the purpose). In this metaphor,
someone is trapped by rising debt service payments, like rising
water in a boat. If nothing is done, the boat will sink, which
would be a complete disaster.
For example, Detroit kept spending more than it raised in taxes,
and promising more benefits to workers than it could fund. This
meant borrowing money, the interest on which meant more spending.
That caused it to raise taxes to nearly the highest in the nation
and make unrealistic property assessments, which led two-thirds of
its people to leave and meant half the remaining people stopped
paying taxes. This forced the city to cut services, which
exacerbated problems. Property values fell, further reducing tax
revenues, and causing many people to abandon properties rather than
pay the unreasonable taxes and deal with inadequate services.
To bail the city out in the boat sense, we could relieve it of some
of its debt obligations. This would allow it to cut taxes and
improve services. This could lead to people returning, the local
economy reviving, and property values increasing, thus leading to
higher tax revenues in a virtuous circle. Eventually, everyone
would be better off. Even the creditors would collect more under
this scheme than if Detroit were to crash and burn.
While this is undoubtedly a good plan, it is never called a
"bailout." It's called "bankruptcy." We don't send people to
debtors' prison or destroy entities that cannot pay their bills. A
federal bankruptcy court grants temporary relief (including
allowing the entity to borrow more money), adjusts the bills to a
payable level, and spreads the pain around according to rules. In
some cases, entities are liquidated, but only when this is the best
outcome in terms of total economic value. So the people who call
for a bailout are never asking for this; it's what would happen if
there were no bailout.
An older use of "bail out" means to provide security for a person
to be released from confinement (from an old word for "deliver").
To bail someone out of trouble in this sense means to guarantee
that they will fulfill obligations if freed from restrictions. In
this analogy, Detroit cannot solve its problems because it is
hemmed in with too many requirements. In order to revitalize the
city, it must cut taxes and improve services, which leaves it no
money to service existing obligations. To rationalize service
delivery after two-thirds of its citizens have left, it needs to
shrink, meaning abandoning urban services in many of its
neighborhoods and relocating the residents. It needs to renegotiate
contracts signed in more optimistic times, sell city assets, and
This kind of bailout is clearly good if the entity that is bailed
out succeeds in fulfilling its obligations eventually. Everyone is
made 100% whole. However if the entity fails (or doesn't try in the
first place), we have compounded the problem. We threw money down a
hole while letting the entity ratchet up its troubles.
Once again, this is not what people mean in modern political
contexts when they ask for a bailout. The objects of the bailout
are never entities that anyone has any faith can solve their
problems on their own. Modern political bailouts come with more
restrictions, not less, and usually replace the existing
management. Moreover, no one has both the confidence to guarantee
the outcome and enough money to pay off the losses if the outcome
The oldest possible etymology comes from a saying that exists in
many forms in Old English and related languages: "When bale is
hext, bote is next." "Bale" in this context means pain or evil (as
in the modern word "baleful"), "hext" means highest, and "bote"
means help. This is one of those irresistibly popular sayings that
is silly at its core. Of course, bale is hext before bote, because
once you get bote, bale declines. If bote never comes, bale keeps
Anyway, this is the source of "bale out," meaning to remove from
pain or evil. It is likely also the source of "bail out" of an
airplane as "bale" is the more common early spelling and the one
that is preserved in English-speaking countries other than the US.
The US spelling is likely a confusion. Bailing out of an airplane
has no connection with either bailing out a boat (you don't save
the airplane; you abandon it to save a person) or getting out of
jail (you don't guarantee that the pilot will return; in fact, you
pretty much guarantee the opposite).
Regardless of etymology, this is what people mean when they propose
financial bailouts. They don't intend to save the airplane; they
just want to protect some person or entity from the consequences of
the crash. They like the grammar here. With boats and felons, the
beneficiary of a bailout is the object, so you have to say what you
are favoring. With airplanes, the subject benefits from bailing out
of the object whose doom is sealed by the act of bailing out. Thus
when someone calls for bailing out something popular, they are
really calling for its destruction and for unrelated favors to be
passed to an unnamed subject.
So, again, ask not for whom the bail tolls; ask who tolls the