The combined effort of the Federal Reserve Bank and the U.S. Treasury hasn't done much towards solving the problems in our banking system. Since my last article about the Fed's action to bailout the financial system there has been an additional $6.684 trillion put to work assisting financial institutions. In the graphic below, from the February 2009 issue of Bloomberg Markets, is a visual of the allocation of all the funds that have been committed throughout the year 2008 until November 25.
Since my last article on the Fed's action in October 2008, the stock of Bank of America has fallen from $38.13 to the current level of $10.20. If the stock market is any indication of confidence in the banking system then Bank of America shareholders demonstrated their clear understanding of the extent of the problem.
Any reduction and/or elimination of bailouts will be the first sign of a recovery in the economy. However, with Bush/Obama asking for an additional $350 billion, the 2nd half of the $700 billion TARP program, from Congress means that we're in for another six months before we can start to look for clear indications of the true state of the economy. Touc.
Source:
- Mark Pittman and Bob Ivry. "How to Get to $8.5 Trillion." Bloomberg Markets. February 2009
