The three major US banks, namely Citigroup, Bank of America and also Morgan Stanley, are in deep trouble, and have indicated that they need more funds from the US government in order to remain in business. With the credit to the system drying up in the last couple of months, due to drying up resources for banks, the entire US industry is facing severe liquidity problems.

At this juncture, the government cannot afford one more major bank collapse. Thus, the only option before the US FED is to support these bad banks through additional funds. With more than 100 billion US dollars pumped into these banks already, the new US government will find it difficult to convince the tax payers , on the need to pump in more money. The key point is that there is no guarantee of these banks returning back to good health with additional funds, because the real extent of the financial problem is not known yet.

A more detailed digging into the banks finances might be required, which can only two three months after the new administration takes over in January 2009. Also with more funds being pumped in, these banks also might become majorly government owned, which is strictly against the capitalist principles. Let us see what the new US government does in 2009.