Financial Rescue

Financial Rescue

 

in capitalist countries, a system of measures taken to improve the financial condition of enterprises and prevent them from going bankrupt or to improve their ability to compete. The enterprises in question are usually joint-stock companies. Financial rescues may be carried out either by the capitalist enterprise, or by other, financially more powerful, companies, banks, or by the state. Financial rescue is one of the means by which capital is centralized and the financial oligarchy strengthened.

Methods of financial rescue include reducing the joint-stock capital by curtailing the issue of new shares and exchanging them for a greater number of old shares. The face value of shares may be reduced, resulting in the distribution of the profits over less capital. This serves as the basis for obtaining new credit, state subsidies, soft loans, and tax privileges and makes it easier for the enterprise to merge with or to be absorbed by another firm or company. Nationalization is another method of financial rescue.

In Imperialism, the Highest Stage of Capitalism, V. I. Lenin referred to the financial rescue of the Union Mining Company, a joint-stock company in Dortmund, by German Disconto-Ge-sellschaft, a major bank. As a result of the operation, the bank made more than 73 million marks in 30 years, and less than 5 percent of the shares remained in the hands of the original stockholders (Poln. sobr. soch., 5th ed., vol. 27, p. 353). Financial rescues of enterprises were especially common during the world economic crisis of 1929–33, which caused an unprecedented wave of bankruptcies. Government participation in financial rescue operations, which became common during this period, essentially represented the direct use by the monopolies of state funds—the taxpayers’ money.

Since World War II (1939–45) the imperialist states and the largest monopolies have frequently resorted to financial rescues. For example, in 1971, Rolls Royce, one of the largest British firms, went bankrupt because it was unable to fulfill a contract with Lockheed, an American company, to build aircraft engines for the TriStar planes. The British government saved Rolls Royce by nationalizing several of the firm’s key enterprises.

G. G. MATIUKHIN

References in periodicals archive ?
54bn total is the largest amount raised from a single institution from the sale of warrants as part of the government's USD700bn financial rescue effort, according to a report by The Associated Press.
1bn financial rescue, which won overwhelming support from creditors last month.
The TARP watchdog, a top government body that oversees the US USD700bn financial rescue package, said that the Federal Reserve had mishandled the bailout of American International Group (NYSE: AIG) (AIG).
The US Treasury has confirmed that Chicago's Northern Trust Corporation (NASDAQ NTRS) has paid USD87m to repurchase government-owned warrants, making it the latest bank to exit the government's financial rescue programme.
TH) has expressed its interest to the Financial Institutions Development Fund to bid for the state financial rescue arm's stake in Siam City Bank Pcl (SCIB.
DE) to sell assets to win approval for a German financial rescue.
government's economic stimulus plan and changes to its financial rescue program, dealers said.
4bn in proceeds from public stock and notes offerings after rejecting funds from the government's financial rescue program.
But investors later cast doubt on the effectiveness of an additional financial rescue program the administration of President Barack Obama plans to release next week, sparking sell orders and turning the market tide.
It's the third time in five months that the federal government has come to Citigroup, Inc's financial rescue.
The umbrella bank last year announced a fundraising plan by taking out perpetual subordinated loans to fund the financial rescue of its member institutions in accordance with the rules of the credit cooperative system.
The bank had received about USD110m as federal financial rescue about three weeks previously.

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