$700B US bailout plan Vs $87.5B UK bailout Plan

            With the bankruptcy of Lehman brothers and other major stock holders in September 2008, The US and the UK government made a plan to resolve and save other banking companies.

            The 700 Billion dollar bailout is a rescue plan for the US Financial system. Its purpose is to use the 700 billion dollars for two years to buy their distressed bonds to stabilize their economy. However the US government would use taxpayer’s money. In result, According to www.timesonlines.com (2008), the bailout will cost every American taxpayer $5,354. But still, financiers fear that the plan will not be sufficient and it will only cause a financial meltdown.

            Americans will have to suffer the rise in taxes. They fear that the plan will not work and would only cause more problems. But the government hopes that after their market recovers, it will return some of the money that was used in the bailout.

            The 87.5 Billion dollar or 50 Billion pound UK Bailout serves a different purpose than the US bailout. Its purpose is to build the confidence in banking companies by injecting money in banks as indicated on www.cnn.com (2008). Some of the profit earned will be returned to the government. UK Government planned this to limit the effects of the financial crisis. They will have to borrow money but it is yet unclear whether they will take actions to raise taxes.

            Their taxpayers are not likely to be affected by this plan because the government will use their own money to gain profit from it, unlike the US bailout where they use taxpayer’s money to pay up for the bad debts of struggling banks.

Sources:

• http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4907530.ece
  
• http://www.cnn.com/2008/BUSINESS/10/08/uk.bailout.questions/index.html?eref=rss_latest
  
• http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4907530.ece
  
• http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4821160.ece

- yuri