Thursday, March 27, 2008

Actions of the US Federal Reserve

The fifth largest bank of the USA, Bear Stearns, lost 98% of its value. JPMorgan Chase offered $2 per share to buy Bear Stearns. The US Federal Reserve backed the deal by offering $30bn in loans.

The US Federal Reserve’s actions are questionable because in a free economy the government is not supposed to interfere in the running of the economy. It is similar to agricultural subsidies, which are offered to the Western farmers to sell their produce in the international market at a very cheap price. This causes acute difficulties for the farmers in the developing countries.

The actions of the US Federal Reserve are also questionable under the WTO rules because it is trying to keep alive the unviable businesses like Bear Stearns by offering loans and backing the deals. However, this action of the US Federal Reserve will be ignored by the Western dominated organizations because the Western acts are based on sheer hypocrisy.


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