US Financial Crisis: Bailout, Whose Burden is that Anyway?



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Code : ECC0016

Year :
2008

Industry : Banking, Insurance and Financial Services

Region : US

Teaching Note: Available

Structured Assignment : Available

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Abstract: This case is written to raise an interesting debate on who has to bear the burden of the bailout package announced to tide over the US Financial Crisis (2008). On October 3rd 2008, the most expensive government intervention in business history in the form of a $700 billion bailout package was approved by the US Congress. This intervention is in addition to the bailout that the government extended to Fannie Mae and Freddie Mac, AIG and the Big Three auto companies. The massive package of $1 trillion is being financed using taxpayers' money to prevent the current crisis from deteriorating further and thereby gradually stabilising the economy. However, it is being argued that, it is unfair towards the heavily burdened US taxpayer to bear the additional burden of bailing out the Wall Street firms. The US Financial Crisis is an outcome of the financial industry's greed along with irresponsible risk taken by the Wall Street financial wizards, who pocketed tens of millions of dollars while creating the bubble. Thus, the US taxpayers feel that they are being penalised for the greed of the managers of big financial institutions, as when profits were made they were kept private, but losses are being socialised.

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Pedagogical Objectives:

  • To analyse the relation between taxation and economic growth
  • To understand the historical perspective of taxation in US and the burden on US taxpayers in the recent times
  • To analyse and debate the impact of current financial crisis on the US taxpayer.

    Keywords : Financial Crisis, Subprime Mortgage, Housing, Investment Banks, AIG, Bailout, Bear Stearns, Rescue Plan, Tax Payers, Taxation, US Tax System

    Contents :
    Tax Burden on Americans
    Bailing out Wall Street Burden on the Mainstreet
    Protecting the Interests of Tax Payers


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