NYTimes.com: Bailout Is a Windfall to Banks, if Not to Borrowers

From NYTimes.com: Bailout Is a Windfall to Banks, if Not to Borrowers

Most of the banks that received the money are far smaller than behemoths like Citigroup or Bank of America. A review of investor presentations and conference calls by executives of some two dozen banks around the country found that few cited lending as a priority. An overwhelming majority saw the bailout program as a no-strings-attached windfall that could be used to pay down debt, acquire other businesses or invest for the future.

(bold- my emphasis)

There’s something seriously wrong with the execution of the bailout if banks are considering it a “no-strings-attached windfall”.

The Obama Adminstration needs to look at this bailout very carefully before handing out the second half of the bailout money.  What are we trying to accomplish with this money and will giving out this money actually meet these goals?

This is a lot like the economic stimulus checks that the government sent out.  Who doesn’t love a windfall from the government?  But, what did it actually do for the economy?  Very Little.

From LATimes.com: With stimulus, there’s more bang in each buck

Analyses of how last year’s tax rebate checks were spent have convinced economists that taxpayers and businesses are not in a “stimulative” mood. Joel Prakken, chairman of Macroeconomic Advisers, a St. Louis-based economic forecasting firm, estimates that taxpayers spent only 30% of the rebate checks they received.

That meant $100 billion in tax reductions bought just $30 billion in demand for goods and services.

“What happened was exactly what economic theory says should happen,” said Valerie Ramey, an economist at UC San Diego. “People knew the tax rebate was temporary, so it didn’t make sense for them to go out and splurge. Rebates are not the best way to stimulate spending.”

What we need is a strong effort to invest in the United States.  Build our future by investing in energy, education, and infrastructure. 

Previous Post Next Post

You Might Also Like

No Comments

Leave a Reply