More Is Less: Cooperation, Coordination, and the Cost of Financial Bailouts

The large financial market interventions which were implemented in 2007 and 2008 in response to the Global Financial Crisis were often the outcome of tense negotiations between governments and financial institutions. There was a sense that financial institutions were holding the economy at ransom for taxpayer money. Academic treatments have so far used an adversarial framework when analyzing the bailouts. However, this framing may be doing a disservice to taxpayers. Using the interventions in the US, UK, and Germany as case studies, it is here shown that the interventions were faster and ultimately cheaper for the taxpayer where the government was willing to spend more to foster cooperative and/or coordinated interventions.