Banking System Essay Example | Topics and Well Written Essays - 250 words

Banking System - Essay Example Due to this banks started experiencing liquidity issues and were unable to have the amount of money required to remain in business and were on the verge of its default. As a result of this, the government came out with a bailout plan to help the banks from experiencing bankruptcy. The bailout can be both beneficial and disadvantageous at the same time. Mostly governments tend to bailout those banking institutions that are too huge too fail and their failure can further increase the economic crises (Scott, 2012). But such policies are anti competitive in nature. This is because when the government bails out an organization, it tends to hold certain shares of the entity and have the right to make decisions. Due to this the government may choose to be very secure in their policies and competition may decline as credit flow to different individuals and organizations may decline and this can slow the process of economic improvement and