The New Face of US Finance

With the nationalization of almost all American financial institutions, US finance is taking a new form and character. The bailouts on virtually all major banks and financial lending companies of the US have placed these then powerful institutions under the protection and regulation of the Federal Government.

Merging of banks and financial lending companies are now evident that the US finance will be relying on the stable banks’ reserves to have a wide and deep balance sheet while considering taking up risky investments hoping to amass huge profits.

The model of “originate and distribute” in which loans are made and then be sold for its values as stocks or securities no longer applies in the present situation. With the mergers taken place, banks of these financial conglomerates will likely to retain a substantial part of the loans to its balance sheet so that it can afford repayment to the loan holders. And the Federal Government will strictly impose this rigid setup to prevent from another fiscal collapse.

Contrary to the system of survival of the fittest, today characterizes problematic financial institutions looking up to the Federal aid to save them from being eaten up by other strong competitors. The financial institutions are now lacking of money capital and the US treasury has the money to lend. This will make the government established its influence in the financial sphere of the economy.

And obviously, the then liberal economic system of the US economy will soon be limited by the hand of the government.