Carl Edward Bailey was born in Bernie, Missouri. He attended Missouri public schools and graduated from high school in Campbell, Missouri in 1912. Bailey wished to attend the University of Missouri but was unable to afford it. He attended Chillicothe Business College in 1915 studying bookkeeping and accounting.
Bailey worked for a time as a railroad brakeman in Texas and afterwards opened a cafe in Campbell. After school he obtained the position of deputy tax collector in Dunklin County, Missouri.
In 1917 he moved to Weona, Arkansas in Poinsett County, Arkansas and obtained work as a cashier in Weona, in nearby Trumann, Arkansas, and later in Augusta, Arkansas.
Bailey studied law and was admitted to the Arkansas bar in 1923. He opened a private law practice in 1925. He served as a deputy prosecuting attorney in the Sixth Judicial District of Arkansas from 1927 to 1931.
He became a prosecuting attorney and served in that position from 1931 to 1935. In 1936 mobster Lucky Luciano was arrested in Hot Springs, Arkansas and offered Bailey a $50,000 bribe if Bailey would not extradite him to New York. Bailey refused the bribe.
In 1935 he ran for the post of Arkansas Attorney General and served one term.
In 1936 Bailey ran for election as Governor of Arkansas and took office in 1937. His administration developed a library and retirement system and established the first agricultural experiment station at Batesville, Arkansas. During his term the Department of Public Welfare was founded and Arkansas was made eligible for federal welfare programs. Bailey was a proponent of President Franklin Delano Roosevelt's New Deal legislation. During his term the Arkansas State Police was created and the first civil service laws in the south were signed.
After Senator Joseph Taylor Robinson died in office, Bailey attempted to take the job. He was chosen by the Democratic convention, which he controlled, as the Democratic nominee. However, Bailey had made a campaign promise when running for governor that he would always put such nominations to a vote of the people. Political opponents within the Democratic Party put up an "independent" candidate, who criticized his broken promise, to oppose him. Bailey lost the election by a large margin.
Bailey's bid for a third term in 1940 proved unsuccessful. After leaving office he served as a lobbyist for a railroad union and taught law at the University of Arkansas.
Carl E. Bailey died of a heart attack on 23 October 1947. He is buried at the Roselawn Memorial Park Cemetery in Little Rock, Arkansas.
The University of Arkansas maintains a scholarship to the law school in his name.