Banks are in the business of making loans. That’s their business. That’s how they make money.
Imagine someone in Washington demanding that movie theaters sell tickets, or grocery stores sell food. That’s how they make money. They don’t need to be forced. Banks either.
Yet when Washington doles out (your) money, as Washington is wont, it always attaches conditions. Hence we hear a lot of talk these days about forcing banks to lend money that Washington has given them through that boondoggle Troubled Asset Relief Program (TARP).
Think back just a little while. It was Washington demanding that lenders make loans to people who couldn’t afford to pay them back that contributed in large measure to the mess that prompted TARP money (your money, actually) to be dumped on these banks.
And what have we learned from this stumbling, bumbling experience? Not much. The givers of (your) money are just itching to force banks to make loans. Isn’t this where we came in?
As Bert Ely writes in the Wall Street Journal, as ill-conceived as the TARP money was, at least it wasn’t intended to be used to make loans. Loans are made from deposits. TARP money was to be used to shore up banks’ capital, as a cushion to absorb losses from loans gone bad (like so many of those the government forced on lenders).
So now, rather than allow banks to lend money it collects from depositors (in essence, investors) to prudently grow it on good-prospect loans, we are reverting to the starting point of government-forced decisions, and this time with your money, not just with depositor-investor money.
Hasn’t Washington got a magical touch? Everything it attempts ends up resulting in almost the diametrical opposite of the intended effect. Every problem it solves, it messes up even more. Well, if they were businessmen, these geniuses probably wouldn’t be in Congress.
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WASN’T OPENING UP THE CREDIT MARKETS BY MAKING MORE MONEY AVAILIABLE FOR LOANS THE WHOLE IDEA BEHIND GIVING OUR MONEY TO THOSE BANKS?Of coarse weshould be demanding the banks make loans ,IT’S OUR MONEY THEY LOBBIED FOR AND GOT TO MAKE LOANS ,NOT HORD OR BUY FAILING CHINESE BANKS!Either loan it like it was intended to or return it ,ALL OF IT!!!
WASN’T OPENING UP THE CREDIT MARKETS BY MAKING MORE MONEY AVAILIABLE FOR LOANS THE WHOLE IDEA BEHIND GIVING OUR MONEY TO THOSE BANKS?Of coarse we should be demanding the banks make loans ,IT’S OUR MONEY THEY LOBBIED FOR AND GOT TO MAKE LOANS ,NOT HORD OR BUY FAILING CHINESE BANKS!Either loan it like it was intended to or return it ,ALL OF IT!!!
I also remember the absolute panic about getting Congressional approval for the TARP program. It seemed like Henry Paulson was trying to avert a catastrophe at the time.
Perhaps, the TARP ” money was to be used to shore up banks’ capital, as a cushion to absorb losses …”, as Ely writes, but did it really help to ease the credit crises? Would our economy have collapsed if the banks didn’t have the TARP money? I don’t know, but it seems to me that panicking and using tax payers money for the TARP sends the wrong message and it will have long term consequences to our economy as well.
As you write: “hasn’t Washington got a magical touch? Everything it attempts ends up resulting in almost the diametrical opposite of the intended effect.”