This article was first published on April 2, 2020.
Editor's note: Oliver Wyman is monitoring the COVID events in real time and we have compiled resources to help our clients and the industries they serve. Please continue to monitor the Oliver Wyman Coronavirus hub for updates.
Governments around the world are creating massive new credit programs or expanding existing ones, so it seems a good time to review some lessons from past programs. In 2011, Douglas Elliott wrote a book on the topic, Uncle Sam in Pinstripes: Evaluating US Federal Credit Programs.
In this document we highlight 7 lessons that he drew from the past to help guide new government programs.
- Government credit programs can be a very effective way to counteract market failures.
- Crisis response programs necessarily differ from steady state credit programs.
- Partnering with private sector financial institutions works well under the right circumstances.
- However, partnering with the private sector requires the right incentive structures.
- The right government accounting rules can make a big difference.
- Government credit programs often live far longer than expected.
- The terms of long-lived credit programs virtually always become worse for taxpayers over time.
Learn more in our latest point of view.