Bank Support Ending?

In a recent article I read, a top financial adviser to Barack Obama advised the President and his administration against pulling the rug out from under the federal support of the banks so as to keep the recovery momentum going, that is, the little bit of recovery we have experienced thus far. This has been a concern of economists actually for a while. The first concern was that you can’t “legsilate away” a recession, however you can definitely help the recovery through federally funded programs, and the second was that the banks may become reliant on the support, and what would they do once they stopped receiving this much needed cash infusion from these federal programs?

Well now, almost two years into the very beginnings of the recession, financial analysts are focusing on what now to do about the slow pull back of government money and programs that were designed to help banks and other financial institutions out of the financial quagmire they had found themselves in. If we pull back too suddenly, it could potentially have a huge negative impact on the recovery that is currently in process and visible through various signs of life in the economy. Unfortunately one of the most important signs of recovery is still missing, that is, the sign that jobs are making their way back.

One of these government funded programs was to back and insure people who were enlisted in money market mutual fund programs, and that is scheduled to end very soon. This was because of the concern that money markets, traditionally one of the safest investment instruments, albeit a low yield one, were even in potential danger of going belly up because of the massive turmoil in all areas of the market and the government wanted to ease people’s minds and back those programs so that there would not be a mass exodus on those as well, as there had been on numerous other financial instruments, such as stocks and bonds.

The key is to have the perfect timing here, and that may not be possible, which will put a wrinkle in the market recovery. However, with the right leadership, advisement, and timing by the putting together of some of the top intelligence in the financial industry, which is the government’s job to attain, we could find ourself sitting more pretty in a few months even if the timing is correct.