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Bailout banks not lending but drowning

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Added by apesphere on 03 Feb 2009
From: www.washingtonpost.com

Image courtesy Scarleth White* via Flickr

Banks that received bailout funds have tended to be the ones who have then cut lending the sharpest. Not the desired result.

Are bailed out banks are making their own case that they should have been allowed to go under. They have been reducing their lending activity despite receiving funds intended to help bring liquidity back to the market not simply to keep alive institutions pummelled by their own poor judgement.

It turns out that the banks who have been receiving funds are those who needed it simply to stay afloat, rather than those who were in a position to channel it into lending straight away. Recipients have not been helped by a nationwide reduction in deposits; deposits are necessary to back lending.

Andrew Newton is the author of The Handbook of Compliance: Making Ethics Work in Financial Services