Lucas sets out to define and measure bailouts, a process that is much more subtle than meets the eye. In the aftermath of GFC-related bailouts, competing narratives surfaced: The public paid untold billions in unfair bailouts of financial institutions, or the bailouts were paid back with interest. Bailouts tend to be measured in three different ways, Lucas says: fair value cost as of the time of the bailout; fair value cost ex ante as of the time of a granted subsidized guarantee; or sum up ex post realized cash flows. The example of the largest bailout, of Fannie Mae and Freddie Mac, demonstrates the huge variations depending on the method, Lucas notes: The fair value cost was $311 billion; ex ante was $8 billion; and ex post the government made $58 billion. Lucas herself calculates the direct cost of bailouts at around $500 billion, or 3.5% of 2009 GDP.

A session from the 2008 Financial Crisis: A Ten-Year Review conference held on 8-9 November 2018 in New York.