The Worst Is Yet To Come

Posted by Andrew Moran

Amidst the current financial crisis, the United States economy is still in a downward spiral that is seemingly impossible to escape from. Kevin Warsh, the Federal Reserve Governor stated that the US economy was in a state of panic that predated the official recession. Among the other topics that he covered in his speech, he alluded to the fact that the state of the economy would most assuredly worsen throughout 2009. He stated that unemployment rates would likely rise throughout 2009, and that efforts to stabilize the financial system would be slower and harder than is typical in recessions. Hearing these comments from a Federal Reserve official makes it seem as if we have not encountered the worst of the financial storm yet. Mr. Warsh is not the only one who shares in this view however. Many analysts and experts from around the country agree that the current financial crisis has only just begun. Experts predict that the total amount of loans that banks will need to write-off will exceed the levels of the Great Depression. Moreover, the total cost of the TARP program has increased significantly since its implementation. Early estimates showed the total cost of the TARP program to taxpayers would be $189 billion. In more recent estimates, the total cost to taxpayers had risen $167 billion, to $356 billion. In this regard, if the experts are right, we have only seen the beginning of this financial disaster. Only time will tell if the experts are indeed correct, or if the US financial system can manage to dig itself out of this mess.

Sources:

http://money.cnn.com/2009/04/06/news/economy/fed_warsh.reut/index.htm?postversion=2009040615

http://money.cnn.com/2009/04/06/news/economy/loan_losses/index.htm?postversion=2009040614

http://money.cnn.com/2009/04/05/news/economy/cbo_tarp_estimate.reut/index.htm?postversion=2009040511