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The US economy is recovering from the shock of last year’s banking collapse, but could continue to need financial assistance for an indefinite period into the future, the Treasury Department stated in a report released Monday.
The report (PDF), entitled “The Next Phase of Government Financial Stabilization and Rehabilitation Policies,” states that “although we are rolling back emergency support programs that are no longer needed, significant parts of the financial system remain impaired. Unanticipated events could intensify pressure on the financial system. In this context, it is prudent to maintain capacity to address unforeseen developments.”
The report said, as quoted by The Hill: “In those markets where conditions have improved, it is unclear whether the improvements achieved to date will persist without a period of continued government support.”
Given the usually subdued and diplomatic language used in government reports on the economy, such a declaration will likely be read by many economists as an indication that there could be trouble ahead for the economy.
The report does have a measure of good news. For instance, a $250 billion “placeholder” rescue fund that President Barack Obama had held over for the 2010 budget will now be canceled, due to a lack of need. But the original $750 billion TARP program, passed in the last months of the Bush administration with the support of then-presidential candidate Obama, will remain in place indefinitely.
President Obama gave an address Monday on Wall Street, where he said “the work of recovery continues,” according to the Guardian’s live blog.
The president also issued a warning to the banks whose balance sheets collapsed last year.
“Hear my words: We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.”
However, as many observers have noted, Wall Street already appears to be returning to old habits. RAW STORY reported earlier this month that investment banks on Wall Street are creating a new class of securitized assets, based on life insurance polices that were purchased from terminally ill people. This new investment class is profitable only if the people whose policies were securitized die when they were expected to — or sooner.
Obama’s plan for a wholesale overhaul of the US’s financial regulatory framework, which the White House announced in June, has been criticized by some for concentrating too much power in the hands of the Federal Reserve, the US central bank that some economists blame for the current fiscal crisis.
Others — mostly Wall Street insiders — have criticized the plan for being too stringent and possibly resulting in investors moving their money off-shore to places with fewer regulations.
Originally posted by Rockpuck
Governments are notorious for being very shortsighted .. politicians are lawyers and actors, they know little to nothing about economics..