The Effect of the US Bailouts across the US and World Economies and the Economic Impact

Second-tier lenders and regional banks are battling to be named on the select list of those included in the US Treasury's $700 billion (Pounds 442 billion) bailout package. While nine of America's biggest banks will receive their $125 billion of rescue money this week, the remaining $125billion of taxpayer funds set aside for stakes in other financial institutions is being shared out. The Treasury has already chosen nine from which it will buy preferential shares in return for emergency capital and will transfer the funds. (Tabb, 8-16)

Bank of America is to receive $25 billion, of which $10 billion has been set aside for its new acquisition, Merrill Lynch. Citigroup, JPMorgan Chase and Wells Fargo also get $25 billion each. Goldman Sachs and Morgan Stanley will both benefit by $10 billion, while Bank of New York will receive up to $3 billion. The final $2billion to $3 billion might go to Wachovia. The Treasury has started apportioning funds to the second-round applicants, believed to total 22 other smaller US banks. There will be additional applicants. In the second round, 16 banks out of a possible 22 are believed to have been approved for capital injections, and have accepted $33 billion from Washington. PNC, the new owner of National City, and Key Corp, are both beneficiaries, along with BB&T Corp, Capital One Financial Corp and SunTrust Bank. Other smaller lenders, including Comerica, First Niagara Financial Group, Huntington Bancshares, Northern Trust, State Street and UCBH said that they had been included in the capital injection programme. Wall Street analysts believe that the Treasury will continue to leverage the lure of the bailout to force ailing banks into consolidation. It is widely thought that the Treasury refused a capital injection for National City, the mortgage lender, unless it agreed to a distressed takeover by PNC. The Treasury is also devising a means of valuing troubled assets owned by the world's biggest banks. Washington is to use the remaining $450 billion of taxpayer funds to buy mortgage-backed securities languishing on the banks' balance sheets.

The phrase redistribution of wealth commonly refers to government policies that are intended to increase the income or benefits of poor people using money raised by general taxation of the rich, the prosperous, and the middle classes. Sometimes the debate is limited only to the redistribution of income, but generally any policy intended to benefit the poor, whether in the form of income or services, can be considered an attempt to redistribute the wealth. The ethical debate about redistribution is usually framed as a conflict between egalitarian proponents of redistribution, who claim that society has a collective moral responsibility to look after the poor, and libertarian critics, who see such transfers as an unethical violation of the property rights of those who pay the taxes.

Social classes vary greatly in different countries. This affects the redistribution debate as the current distribution determines the extent and type of poverty and ...