How are the banks affecting the US economy thanks to the TARP and other bailouts from the US government - Essay Example

This research report looks into the bank effects on the United States Economy, after the bailout plan, and how the banks have coped with the plan in their economic functions which according to Fusan, R., (2008, pg 1095), include netting and settlement of payments, through collection and paying agents for customers, clearing and settlements of payments which enables them to economize on reserves held for such settlements of payments, since inward and outward payments offset each other. They also play a vital economic role in credit intermediation, through borrowing and lending back-to-back on their own account as middlemen.

Therefore, with the economy maimed to the point where the bank roles were threatened, the Government through its responsibility as the economic overseer intervened to allow them to borrow more on demand debt as well as short-term debt and to provide more long term loans. The borrowed money would mainly maintain cash reserves, invest in marketable securities that can be readily converted into cash if needed and raising replacement funding as required from various sources such as whole sale cash markets and securities market (Fusan, R.

, 2008, pg 1102) According to Alfred and Yalata, (2009, pg 300), the banks that agreed to receive preferred stock investments from the US Treasury included Goldman Sachs Group Inc, J.P. Morgan Chase & Co., Morgan Stanley, Bank of America Corp., Citigroup Inc., Bank of New York Mello