Recession in North America

Anonymous

National Institute Economic Review, 2009, vol. 208, 17-21

Abstract: While US banks remain in a severe state of distress, there are now signs that the banking system has stabilised and is not expected to deteriorate further. Recovery, however, remains some way off. US authorities have been slow to address problems facing the asset side of bank balance sheets, as the election and presidential changeover delayed an immediate response. The Troubled Asset Relief Program (TARP) was initiated in October 2008, as part of the Emergency Economic Stabilization Act of 2008. The original purpose of the program was to fund government purchases of toxic banking assets. However, the policy was subsequently amended, so that the funds were primarily used to buy equity stakes in banks. While this was an efficient way to inject essential capital into the banking system to avoid a meltdown, it has done little to address the fundamental problems of the banking sector, as there remains enormous uncertainty surrounding the valuation of assets held by individual banks.

Date: 2009
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