Do Banks Need MORE Money?
When our leaders rushed to provide hundreds of billions of dollars to banks as part of bailout legislation last year, they told us that the plan was to free up the credit markets so that consumers could get loans. All sorts of magic was supposed to happen as banks were infused with taxpayer dollars:
- Interest rates on consumer loans and mortgages would drop.
- More credit would be extended.
- Fewer rejections would be sent.
- Tightened lending standards would relax.
Interest rates did come down, but little else happened. It’s hard to take advantage of low interest rates when you can’t get approved for your loan. And that is what has been happening. Lending standards have been tight, and instead of extending credit again, credit is being restricted. (Just ask the folks that are receiving word that their credit limits have been lowered.)
Apparently massive amounts of our money shouldn’t actually be used to help us. This isn’t a real surprise, of course. “Trickle down” has rarely worked as advertised since Reagonomics made it popular just over 20 years ago. But that doesn’t stop current leaders from insisting that we should pump more money into banks. Ben Bernanke offered this in London earlier today, reports CNN Money:
Bernanke suggested that more banks and financial firms are likely to need additional capital injections from the government, and that further guarantees of their debt could be necessary, in return for the federal government receiving further equity in the firms.
The Fed chairman also said that “removing troubled assets from institutions’ balance sheets, as was initially proposed for the U.S. financial rescue plan,” might also be needed to supplement any further investments in banks.
Will more money sent to banks change things? Not in the long run. And for most of us regular folks, not in the short run, either. As long as banks are given money and carte blanche to do what they want with it, the rest of us are just going to get by as we can. Until an individual economic stimulus is offered, we are unlikely to see any really changes to consumer spending.
