Although it was intended to avert economic catastrophe, the $700-billion bank-bailout program actually set financial markets up for an even bigger fall in the future, according to the man overseeing the money. CNNMoney.com has the story:
After financial institutions threatened the stability of the economy by making irresponsible bets, the government responded by sending them massive infusions of capital. In addition, Treasury gave companies cheap loans to encourage them to buy risky assets like mortgage-backed securities that were a major cause of the credit crisis. The report also notes that “too big to fail” firms only got bigger because of TARP.
All of these issues have set the stage for another large-scale bust unless serious effort is made on reforming regulation of the financial markets, the report said.
For more on the problems with the bailout, click here.