Curbing Bailouts: Bank Crises and Democratic Accountability in Comparative Perspective

Do democratic governments and authoritarian regimes respond to banking crises in the same way? Banking crises threaten the stability and growth of economies around the world. In response, politicians restore banks to solvency by redistributing losses from bank shareholders and depositors to taxpayers. Whereas some governments stay close to the prescriptions espoused by Sir Walter Bagehot in the 19th century that limit the costs shouldered by taxpayers, others engage in generous bank bailouts at great cost to society. In this comparative analysis of late 20th-century banking crises, Guillermo Rosas identifies political regime type as the determining factor. Compared with authoritarian regimes, democratic regimes show a lower propensity toward dramatic, costly bailouts. See more