How does this actually help the economy? Banks are in the BUSINESS of lending. As such, they have every incentive to lend out every dollar that they are legally able to lend. The idea of “lending” however is that you will eventually be repaid the principal with interest. The banks are getting trillions in free money from the Federal government and Federal Reserve, so they should now have an even bigger incentive to lend, assuming that their companies were in decent shape.
The problem (the bankers all know it, and Obama probably knows it) is that the banks are sitting on hundreds of billions, if not trillions in potential losses. If the government forced banks to adhere to any sort of sane accounting standards, they would all have to declare bankruptcy TOMORROW. Since this so-called “crisis” began, ALL of the government programs designed to “stimulate lending” or whatever have been designed to do only one thing. To transfer massive losses off the banks’ balance sheets, and put them on the back of the taxpayer. The banks themselves have been cutting people’s credit limits, jacking interest rates and fees, slapping new penalties on their customers . . . ALL in a desperate attempt to re-capitalize their overwhelming losses.
I don’t think Obama is stupid. This is just a big smoke and mirrors show. The way to fix the economy is to recognize ALL of the bad losses, let the strong institutions survive, let the weak ones (most of the big banks fall into that category) FAIL and purge all of the bad debt from the system. Only then will we see any chance of a sustainable recovery.
- usapatriot
