US Bank Bailout vs. UK Bank Bailout: A Comparison

Britain’s bailout of its ailing banks reflects a model that some critics characterize as nothing short of socialism, while the $750 billion bailout program in the United States is viewed as corporate welfare with very little oversight. Without supporting one or the other, following is a bare-bones comparison of the two programs:

In the United Kingdom:

• Bailout cash by written agreement must be infused into the economy to free up tight credit markets.
• Government representatives now sit on the rescued banks’ boards of directors, and have the right to vote on major decisions.
• The government will receive a 12 percent return on investment.

In the United States:

• Banks are not required to use bailout money to free up tight credit markets; in fact, some have used the money to compensate their CEOs and pay dividends to stockholders.
• The government gains no controlling interest in the banks, and no seats on the board.
• The government will receive a five percent return on investment.
• The oversight panel over the U.S. bailout still has not been created six weeks after passage of the bill.

We believe that there are bankers on both sides of the Atlantic who are principled and hold their interests of their stakeholders with the utmost concern.  The question is:  Which plan is more likely to work?