During the latter part of 2008 the financial stability of the United States was confronted with substantial obstacles as the banking industry was shocked by rapid changes in the global economic system. Confusion around lots of newly created financial instruments resulted in extreme movements in prices across the world.

The impact was so destructive that a long time Wall Street titan, Lehman Brothers, was forced to declare bankruptcy. Several additional major banks averted the same end only by being scooped up by competitors at a fraction of the price they would have commanded not long ago.

A number of economists predicted that the economy was so dire that a recession resembling that of the beginning of the 20th century was not only a possibility but even probable. In response the government felt obligated to do something and the legislature quickly approved an economic stimulus package to help protect the economy from a devastating recession.

Congress has budgeted for 2 types of funds to be spent; one was meant for the banks and other financial institutions and the second was intended for the greater economy. The purpose of the legislation was to accomplish two things; immediately reduce the current risks to the banking sector and also create steady stimulation to the economy to lessen the effect of a depression.

The bill was immediately passed with following presidents and congresses increasing the scope of a number of the stimulus programs initially started. The banks benefited from plans such as the TARP that helped them to rid themselves of assets that had turned into a drain on their balance sheet.

Congress also maintained their commitment to helping out the financial companies by working in concert with them and other affected nations around the globe. Economic policy such as tax rates and monetary policy were modified to support the financial companies.

The other sectors of the domestic economy were also budgeted money in the federal stimulus grants package. Vast sums of money were earmarked to encourage growth in many industries such as environmental, criminal justice, and international development.

Money was also used to implement training resources to help anyone out of work because of the financial slowdown. Government money was dispensed throughout the US economy by many avenues such as grant programs and funding to state governments.

Congress’s bid to stimulate the US economy in order to avert a crisis was a controversial decision at the time and still is now. Some thought the risks to the economy were not as terrible as many economists suggested while other opponents concurred with the possible risks but felt the proposed cure ineffective. Whichever side of the debate may ultimately prove correct it will undoubtedly be many years and billions spent before anyone can be sure of which.

Find information on stimulus grants and other government grant programs

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Publish By:
Scott Vicks
Time:
Monday, October 26th, 2009 at 2:20 pm
Category:
Finance
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