Quick Take - Has The Series Of Bailouts On Wall Street Turned The US Socialist?

New Delhi, India (PressExposure) November 17, 2009 -- We asked... Sudip Bandypadhyay, director and CEO, Reliance Money; Kapil Krishan, chief financial officer, India Infoline; David Stanley, chairman, Indian Direct Selling Association; Amit Azad, director, Azad Financial Services; Ajay D’souza, analyst, Credit Rating Information Services of India Limited (Crisil); Abhishek Nirjar, chairman-management development programme, IIM-Lucknow; Nilesh Ganjwala, chief executive officer, Innergise Solutions; V.K. Madhav Mohan, management mentor; Balavevan R., associate, Centre for Civil Society, Amit Jain, director & head-operations, Goldstone Imaging

"The US has very little choice at this point of time... (it) would remain a capitalist society."

Sudip Bandyopadhyay, director and CEO, Reliance Money

"The US package aims to stabilise the nation's financial institutions."

David Stanley, chairman, Indian Director Selling Association

"Accountability for greed has been side-stepped, ostensibly to protect small savers."

V.K. Madhav Mohan, management mentor

YES BECAUSE: For the US, so many interventions in such a short period is unprecedented. especially so under a Republican administration, which has traditionally believed in free markets. The first sign of a shift towards a government-controlled economy were the bailouts of Bear Stearns, Fannie Mae, Freddie Mac and AIG. If the government really wanted to preserve a free market, it would have allowed these failures to go through to penalise irresponsible and reckless decisions on Wall Street. In recent years, unbridled greed resulted in wrong decisions, as powerful Wall Street lobbies kept necessary regulations at bay. These failures have made Main Street lose its trust in Wall Street. It is certain that future administrators will push hard for heavy regulation to prevent a repeat.

NO BECAUSE: The bailouts are attempts to rebuild confidence in the financial system, not control it. The bailout packages aim to tackle the root of the trouble by using taxpayer’s money to buy the bad loans, and allow these companies to resume normal lending operations. This will help in the long run as unburdened financial institutions will be able to pump more credit back into a slowing economy. Alternatively, a truly socialist intervention would have ignored corporate America and instead focused on helping individual borrowers pay back their home loans. Instead, the focus has been on restoring the ability of lenders and investment banks — which power the US economy — to pump affordable credit back into the economy. This emphasises the inherently capitalist nature of US society.

MAYBE BECAUSE: Risk is an essential part of a capitalist set-up. While some businesses succeed because they take calculated risks, others fail because of recklessness. The current crisis is a result of several businesses getting greedy and failing simultaneously. Bailing out these businesses raises the issue of moral hazard — particularly since it is being backed by public money. However, this credit crunch is unlike any other. Without these bailouts, global markets will remain locked in a vicious cycle of expensive credit that leads to low growth. Therefore, extraordinary measures are required to re-inject capital into the economy. However, strict rules on collateral requirements and tougher supervision for credit rating agencies that decide the credit worthiness of institutions and individuals are also needed.

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Press Release Submitted On: November 16, 2009 at 1:10 am
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