THE GOVERNMENT SHUTDOWN & THE FINANCIAL MARKETS RICK TOBIN
In our nation’s entire history, we have never had the U.S. government actually default on their financial
obligations. A significant reduction of government services or benefits (i.e., Social Security, Food Stamps,
subsidized housing, etc.) could negatively impact all types of investments both here and abroad such as
stocks, bonds, mortgages, and real estate.
Why can’t the banks bail out the government as a repayment?
Do you know that the Federal Reserve and the U.S. Treasury supposedly has “lent” out over $16 trillion as
well to many of the largest banks and investments banks in America since the near financial implosion of
the world’s entire financial system, back in September 2008? These banks included Bank of America, JP
Morgan Chase, Wells Fargo, Citibank, and several other well-known financial institutions.
The primary reason for allegedly
lending, gifting, or partnering up
with
these
same
financial
institutions by way of the $16
trillion
cash
infusion
of
“emergency funds” was to help
keep these “Too big to fail”
financial
institutions
from
collapsing. Had any of the Top 5
“Big Banks” imploded between
the Fall of 2008 and present
day, then their on and off
balance
sheet
derivatives
investments (i.e., Credit Default
Swaps, Interest Rate Options,
etc.) may have cascaded like a
falling domino chain across the
world.
In theory, shouldn’t these same banks which received $16 trillion in bailout funds since September 2008,
have to pay back the same $16 trillion if and when they ever get healthy enough again? If so, then these
banks and investment banks could pay off the $16 trillion deficit by themselves? At the very least, the Big
Banks’ monthly payments back to the Fed and / or U.S. Treasury should cover the U.S. government’s
monthly budget obligations for many years to come.