Where's the Improvement?

February 9, 2010
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Late last year as the majority of banks appeared primed for bankruptcy or possibly hostile takeovers, the government felt the need and pressure to step in. Faced with a no-win situation, spending billions to bail out these fragile companies was the decision accepted and pursued by the nation's leaders. One year later, politicians are passing off the TARP, or Troubled Asset Relief Program, as a success. However, the benefits or positives are yet to show.

Many banks have all but stopped lending and have resorted instead to raising cash. After all, these companies are feared of a repeat performance. Overall, showing the funds from the government have not truly done their job. The whole point of the government intervention was to rescue the banks from collapse, but to also get them back to lending. That goal has yet to be met.

Possibly the most frightening part of the entire debacle was watching the government take stake and even massive control in these institutions. The first two companies to repay TARP, Goldman Sachs and JP Morgan, commented on how they quickly repaid the money due to the startling level of control the government took over their companies. Luckily, as these companies probably could have survived without government assistance in the first place, the money was paid back before apocalyptic control was taken. However, many institutions such as Citigroup, Fannie Mae, Freddie Mac, Wells Fargo and others have had to endure the side effects of what once was falsely misread as a generous favor from Uncle Sam.

After making the controversial decision to bail out banks, the government was also left with these same companies turning around and giving their emergency funds out as bonuses. Standing idly by and watching this money go out to CEO's and their counterparts, the people responsible for this man-made disaster in the first place, was suicidal for the government officials already on the firing range.

Therefore, the government increased its power even further by limiting bonuses. Stepping outside of the obvious negative of this governmental authority, the restriction has also left many banks unable to secure long term leadership. Bank of America recently paid its debt not because the company had once again become financially sound, but simply because its search for a new CEO was severely strained by the overhanging control of the government.

Despite the announced success of this government intervention, the situation in actuality is not much better than it was at this time last year. The only difference being these banks now know they can depend on the government to bail them out when their own decision making and leadership turn subpar. That doesn't improve the economy, but instead only sets the nation up for future and maybe even more catastrophic failures.

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crawfordkid This work has been published in the Teen Ink monthly print magazine. said...
Feb. 15, 2010 at 11:23 pm
Wow, I've finally found someone who actually GETS IT! I was beginning to worry that no one on here could understand the horror show taking place in our countries leadership. Bravo dude, bravo!
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