The blow-up of the financial crisis was seen in the crumbling of iconic investment banks such as Lehman Brothers, Goldman Sachs and Morgan Stanley. The waves of the financial tsunami have breached the continental boundaries and assumed global dimensions.

The fallouts of the recent subprime crisis have turned out to be far more grave and sweeping than feared. The build up which started over a year back with the correction in the US real estate prices nearly seized the mortgage-backed securities market. This resulted initially in the absorption of Bear Sterns and Merrill Lynch by two large commercial banks namely JP Morgan and Bank of America respectively.

The unusually large size of the crisis required matching relief measures. The US Government has given a bailout package of $700 bn, named Troubled Assets Relief Program (TARP), under which toxic assets of the banking system will be bought by the US Treasury to facilitate the respective banks in cleaning up their balance sheets and resume normal business. The central banks of European and other countries also considered similar arrangements.

In intellectual quarters the world over, especially in the US, the bailout move has been questioned from the ethical and moral hazard point of view. It has been felt that the crisis is an outcome of attempts to make profits by way of reckless and irresponsible functioning by the affected investment bankers/institutions and their top functionaries. Any bailout move will only encourage such reckless behavior in future. The Federal Reserve and the US Government are not supposed to give away taxpayers' money to save institutions which have actually played havoc by their deliberate acts of omission and commission. If they are left to suffer and pay for their misdoings, the required message will go around in the larger public interest.

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