# Bailouts

`kaal:entity:bailouts`

**Status.** derived

This node is assembled mechanically from the 7 claims that carry the concept tag `bailouts`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

7 claims across 3 works, 2011 to 2012.

**2011**

- [1806252-013](https://wulfkaal.github.io/claims/1806252-013) [mechanism/argued] *(failure mode)* -- Because banks expect to be bailed out with taxpayer funds, they may have less incentive to monitor their hedge fund lending activities, even though hedge funds are not themselves counterparties in government bailouts.
  > Hedge funds are not counterparties in government bailouts, but if banks get bailed out, they may have less incentive to monitor their hedge fund lending activities or other hedge fund-related business.
  Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252

**2012**

- [1998455-001](https://wulfkaal.github.io/claims/1998455-001) [mechanism/argued] *(failure mode)* -- Government bailouts of systemically important financial institutions create strong incentives for those institutions to externalize the cost of their risk taking onto taxpayers.
  > Government bailouts create strong incentives to externalize the cost of SIFIs' risk taking onto taxpayers.
  Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455
- [1998455-002](https://wulfkaal.github.io/claims/1998455-002) [mechanism/argued] *(failure mode)* -- The implicit guarantees contained in a bailout multiply the incentives for systemically important financial institutions to increase leverage, because those guarantees make debt cheaper than equity.
  > The implicit guarantees in a bailout may also multiply the incentives for SIFIs to increase leverage because the guarantees could make debt cheaper than equity.
  Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455
- [1998455-003](https://wulfkaal.github.io/claims/1998455-003) [mechanism/argued] *(failure mode)* -- Because governments prioritize the rescue of systemically important financial institutions over other entities, those institutions are incentivized to adopt similar risk profiles and to correlate their risks.
  > Government prioritization of SIFI bailouts could incentivize SIFIs to adopt similar risk profiles and correlate risks.
  Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455
- [1998455-037](https://wulfkaal.github.io/claims/1998455-037) [failure/argued] *(failure mode)* -- Combining the existing prioritization of bailouts for systemically important institutions with central bank purchases of their contingent capital in a given jurisdiction would further incentivize those institutions to adopt similar risk profiles and correlate their risks.
  > Combining bailout prioritization with central bank CCS purchases in a given jurisdiction could further incentivize SIFIs to adopt similar risk profiles and corre- late risks.
  Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455
- [1998455-039](https://wulfkaal.github.io/claims/1998455-039) [failure/argued] *(failure mode)* -- An outright retroactive charge for government subsidies or for actions taken by regulators could backfire, because it would legitimize the bailout and perpetuate its socially suboptimal consequences.
  > On the other hand, an outright retroactive charge for government subsi- dies or actions taken by regulators could actually legitimize the bailout and perpetuate its socially suboptimal consequences.
  Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455
- [2061166-010](https://wulfkaal.github.io/claims/2061166-010) [mechanism/argued] *(failure mode)* -- Reliance on public bail-outs, unaccompanied by any threat that management, shareholders and creditors would share significant losses, created an asymmetric incentive for excessive risk taking by financial institutions.
  > The reliance on a public bail-out without the threat of any significant losses shared by management, shareholders and creditors may have created an asymmetric incentive for excessive risk taking by financial institutions.
  Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012). SSRN: https://ssrn.com/abstract=2061166

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/bailouts.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.