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IS BAILOUT AN ANSWER TO GLOBAL FINANCIAL CRISIS?

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Author(s): Dr. Pankaj Gupta

Journal: International Journal of Computer Science and Management Studies
ISSN 2231-5268

Volume: 12;
Issue: 01;
Start page: 102;
Date: 2012;
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Keywords: Bailout | Global Finance | Investor

ABSTRACT
The financial system in the USA, identified as the largest economy in the world, with a strong and robust financial system, has been in the eye of a storm in the past two years and more so in the recent months. To control this, US Govt. has adopted a bailout plan (The Emergency Economic Stabilization Act of 2008) to spend up to US$700 billion to purchase distressed assets, especially mortgage-backed securities, and make capital injections into banks. But, experience with financial crisis in other countries suggests that success is by no means guaranteed. Also this has become the hottest topic ofdebate between government officials, public, politicians, financiers and economists. All of them have different point of view on this. Like, according to some economists, the plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earnprofits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise. So this paper tries to explain about the bailout plan of US Govt., objectives of bailout plan, how it will work. How such bailout plans helped other country economies?What is the rationale of bailout plan and amount of such bailout plan adopted by different countries? Is the US bailout plan efficient to control global financial crisis? Is it possible for government to adopt other measures in this regard?
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