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News Link • Economy - Economics USA

7 Severe Headwinds Facing The Economy

#3 Local government carnage States and local governments remain in bad shape with large budget deficits leading to spending cutbacks, layoff and higher taxes. This is another potential crisis in the making in the period ahead. #5 Toxic assets Banks went into the 2008 credit crisis loaded with toxic assets, and, to a large extent, they still have them. While TARP was originally proposed by Treasury Secretary Paulson as a buyout of toxic assets, the program was almost immediately changed to generalized bailout. The accounting rule-makers were then pressured to do away with mark-to-market accounting, thereby papering over the problem and leaving most of the toxic assets the banks' books, where they remain today. This is one of the reasons banks are hoarding cash and are so reluctant to lend. They know what they have.

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