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Financial Industry. TARP and other programs implemented during
the height of the financial crisis helped prevent a meltdown of the
global financial system, but did not solve many longer-running, more
structural problems. The Administration pushed for an overhaul of
the financial regulatory system, and its proposals eventually led to the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Among its many provisions, the Dodd-Frank Act required stress tests
to assess the health of financial institutions, provided tools for orderly
liquidations of large financial firms, and increased the transparency of
derivatives markets. As a result of these actions, large banks are now
much better capitalized and credit flows have resumed. While some of
the Dodd-Frank Act’s provisions are still being implemented and much
work remains to be done, the financial system has become less vulnerable
and families are better protected when making important financial
decisions.
Small Businesses. Small business struggled under the weight
of weak consumer demand and tight credit in the recession, and the
Administration provided support in several ways. Specifically, the
Administration extended the guarantees and the availability of Small
Business Administration loans and created new programs such as the
Small Business Lending Funds and the State Small Business Credit
Initiative. It also helped small businesses indirectly by providing TARP
funds to small and large banks across the country. Bank credit to small
businesses, which had contracted sharply during the recession, has been
expanding since 2011.
made by CBO (2013a) and by independent academic studies, which use a
variety of methodologies and data sources. Adding the estimated effect of
subsequent fiscal policy measures, CEA model finds that the combined effect
of these actions increased GDP above what it otherwise would have been
by more than 2 percent a year for three years, and created or saved about
9 million job-years through 2012. Moreover, research on economic growth
generally finds that these types of benefits have a long-lasting impact on
the economy even after the initial policy impetus has expired. This is even
more true when the policy itself included significant measures for long-term
growth, as described later in this chapter.
Model-Based Estimates of the Macroeconomic Effects of the
Recovery Act and Subsequent Fiscal Legislation
Evaluating effects of fiscal policy in general, and the Recovery Act in
particular, is challenging for several reasons. Appendix 2 describes these
The Economic Impact of the American Recovery and Reinvestment Act Five Years Later | 105