U.S. Federal Government must get out of the business of guaranteeing against bank failures.
The United States Government recently has been going through a recession due to the fact that our banks in the country have gone into failure. So far this year, forty-three banks have gone into failure compared to the one hundred forty from last year. However, several believe that this is just a start and more is to come. More likely, the number of banks to fail will increase yearly over the next few years. Banks are doomed to fail for many reasons, which will be discussed later on in the paper. One particular issue is the competitive disparitiy between large and small financial institutions. The government seems to focus more on larger institutions than the smaller ones. This often leads to the closing of many small banks. However, this is just one issue; there are plenty more issues such as banks own self interest, multiplier effect, money supply, a possibility of diversification, and many more. These are things why the government needs to stop bailing out banks. Hence, the companies that went into failure should not have been bailed out by the government for several reasons.
In order to bail banks out, it is going to cost the Federal Government $23.7 trillion dollars. That statement alone should make us all a bit concerned at the least. According to Neil Barofsky, special inspector-general for the Troubled Asset Relief Program (TARP), “there are thirty-five major fraud investigations related to the bailout and that a substantial section of banks did not use their bailout funds to make new loans” (Damon). In this case the banks are nearly in failure but certainly not just yet, only until the government bails them out. A major role of the Federal Reserve; is to control the money supply by assuring the stability of the banking system. The Feds are trying to control the money supply but at a big cost. The way things should be is that if a bank... [continues]
The United States Government recently has been going through a recession due to the fact that our banks in the country have gone into failure. So far this year, forty-three banks have gone into failure compared to the one hundred forty from last year. However, several believe that this is just a start and more is to come. More likely, the number of banks to fail will increase yearly over the next few years. Banks are doomed to fail for many reasons, which will be discussed later on in the paper. One particular issue is the competitive disparitiy between large and small financial institutions. The government seems to focus more on larger institutions than the smaller ones. This often leads to the closing of many small banks. However, this is just one issue; there are plenty more issues such as banks own self interest, multiplier effect, money supply, a possibility of diversification, and many more. These are things why the government needs to stop bailing out banks. Hence, the companies that went into failure should not have been bailed out by the government for several reasons.
In order to bail banks out, it is going to cost the Federal Government $23.7 trillion dollars. That statement alone should make us all a bit concerned at the least. According to Neil Barofsky, special inspector-general for the Troubled Asset Relief Program (TARP), “there are thirty-five major fraud investigations related to the bailout and that a substantial section of banks did not use their bailout funds to make new loans” (Damon). In this case the banks are nearly in failure but certainly not just yet, only until the government bails them out. A major role of the Federal Reserve; is to control the money supply by assuring the stability of the banking system. The Feds are trying to control the money supply but at a big cost. The way things should be is that if a bank... [continues]
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(2011, 02). U.S. Federal Government Must Get Out of the Business of Guaranteeing Against Bank Failures. StudyMode.com. Retrieved 02, 2011, from http://www.studymode.com/essays/U-s-Federal-Government-Must-Get-Out-578850.html
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