Economic Stimulus Banking Firms and Research Proposal

Excerpt from Research Proposal :

These can include the stimulus package, though, because the Obama Administration is still offering stimulus dollars to banks and other companies that need help and cannot take care of their customers in the way that they used to and preferred to.

Figure 1: How Severe is the Subprime Mess?

Obviously, the subprime mess is a serious concern for everyone. The stimulus package was designed to help the banks and the people who borrowed from them with the fact that they could not pay for the debts that they had created for themselves. That was true for the people who had mortgages, and also true for the banks that loaned money to these people. The stimulus package was designed to help them both out so that they could take care of their debts and move forward again. However, the economic stimulus package has not fixed everything that was hoped. There are still problems with the economy, and the package is not moving things forward as fast as people would like, especially where working with banks to keep homes is concerned.

Figure 2: Subprime Mortgage Crisis

As for opinions about the stimulus package and what it does or does not do for banks and other lenders as well as the people who borrow from them, there are a lot of different thoughts on the matter. Clearly, the economic stimulus package was a good idea from the standpoint of trying to help people pay their bills and keep their homes. It was designed to get the country moving again, but recent news reports have shed light on the fact that the stimulus money may not be moving into the areas where it is really needed as much as it is supposed to -- and that some of the money may be going to places that technically do not even exist. A lot of Congressional Districts that allegedly were handed a lot of stimulus money are nonexistent, and that leaves the American people wondering where that money actually went. That is especially worrisome for people who are losing their homes and wondering if that 'missing' money could have helped them.

By bailing out banks and lending institutions, the government also sent a message that it would step in and be a 'parent' when people or companies got into trouble in a big way. It is very hard to say whether that is a good message or not, because it implies that there is always a safety net -- at least if the business is big enough to affect the national economy. For small-time people and businesses, though, there is no safety net. There are still many people who are in foreclosure, and who are losing their homes. There are still banks who are refusing to work with good people who have lost their jobs and ended up with some credit problems that they now must try to tackle and get through. These banks have the power to help these people get through their tough times, and part of the stimulus money went for this purpose, but was it enough? The people who are still out of their homes because their bank would not or could not help them probably do not feel it was enough.

At what point does a government draw the line and say that there is nothing more that can be done? This is the question that the U.S. government is facing. There has even been talk of a second stimulus, and the homebuyer tax credit is also being discussed. Extending and expanding it would entice more people to buy homes, which would be good for the economy. However, if banks keep credit and lending so tight that people cannot get homes, the homebuyer tax credit and other stimulus package 'deals' will not be helpful. In addition, if banks do not work with homeowners who already have homes to help them avoid foreclosure, these people will have their credit ruined for years and will not be able to take advantage of any kind of homebuying incentives that may be offered in the near future.

While banks certainly have to have rules and they cannot just give money away to people, it is very important that the banks also see the value in working with consumers. The government worked with the banks, and the American people want to see that same courtesy extended from the banks to them. There are some banks, like the ones discussed above, that are generally doing what they can to help their consumers, but there are other banks that are not very interested. They assume that there will always be more customers, so they do not need to bend any rules to help out the customers that they have. While this is unfortunate, especially in light of the stimulus package, there is only so much that can be done about it. Consumers will continue to struggle to some degree if they do not have much money or if their credit is lacking, and that means that other companies and businesses will struggle because those consumers are not spending much money. That hurts the economy overall, negating some of the positive effects that the stimulus package would have otherwise had on the American economy. While the economic stimulus package is still a good thing, there are problems with the way that it is being executed. Until those are fixed, it can never do all that it was intended to do to help the American people.

References

Anderson, Mark (2009-06-30). "Down in flames: Why Money Store was a bust." Sacramento Business Journal. American City Business Journals, Inc.

"Bank vows $20 billion for green projects." msnbc. 2008-02-06. http://www.msnbc.msn.com/id/17500301/.

"Credit Cards' Latest Pitch: Green Benefits." Wall Street Journal. 2007-11-30. http://online.wsj.com/article/SB120225763311445823.html.

Freer, Jim (2007-03-09). "BofA donates $1M to Camillus House." South Florida Business

International Research Journal of Finance and Economics, Issue 3 (2006) http://www.eurojournals.com/finance.htm

Kowalczyk, Liz (2007-03-10). "Bank to aid health centers." The Boston Globe. http://www.boston.com/business/globe/articles/2007/03/10/bank_to_aid_health_centers/.

"Scores By Industry" (chart). American Customer Satisfaction Index. http://www.theacsi.org/index.php?option=com_content&task=view&id=147&Itemid=155&i=Banks.

Steverman, Ben (2008-10-18). "Business Week -- the Financial Crisis Blame Game." Businessweek.com. http://www.businessweek.com/investor/content/oct2008/pi20081017 _950382.htm?chan=top+news_top+news+index+-+temp_top+story.

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