The US government’s bailout package may not work the way it is desired to, says Joseph Stiglitz, the 2001 Nobel Prize winner. “It is a peculiarly-structured programme,” he said, “The US government takes the responsilility of all the losses and in return gets a 50% share of profit on its 92% investment. What kind of partnership is that?”. He feels it’s a lose-lose situation for the Us government
Moreover he added -: the financial system in the US engaged in too much risk-taking. “If you are a bank too big to fail, you have a one-sided bet. If you win, you walk off with the profit. If you lose, you are too big to fail, so the government picks up the losses. It is a system built-in sense of excessive risk taking,” he said. “Earlier the banks took a excessive risk as it was predicted by some economist and they broke”
Stiglitz said one of the reasons there is feeling the bailout packages won’t work is so many people in the financial markets are afraid that once taxpayers realize how badly they have been treated, they will demand a way of getting some cash back.
IMF (The International Monetary Fund) in its estimates had made it very clear that the losses in the banking system were very big and that the problem in the banking system is very severe even after the bailout package it will not fill the hole.
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