Today we get FinancialStability.gov to help us with the alphabet-soup intricacies of keeping the banks alive and lending.
A glossary, called the “Decoder,” translates financial terms and acronyms related to the toxic-asset plan--the world according to not GARP but TARP, AGP et al.
A map shows the local impact of banks and financial institutions taking part in the Capital Purchase Program, which uses federal funds to encourage lending, and a searchable database lists the contracts and agreements that are part of the Financial Stability Plan.
Professor Obama promised transparency, but he didn't tell us how much homework would come with the course.
Showing posts with label bank lending. Show all posts
Showing posts with label bank lending. Show all posts
Tuesday, March 31, 2009
Tuesday, February 03, 2009
Bailout Boomerang
Taxpayer money pouring into banks has not only failed to get loans flowing but even worsened the practices of those that received it.
"The federal government," the Washington Post reports, "has invested almost $200 billion in U.S. banks over the last three months to spark new lending to consumers and businesses.
"So far, it hasn't worked. Lending has declined, and banks that got government money on average have reduced lending more sharply than banks that didn't."
In the Paulson free-money giveaway, recipients have used government funds to merge with weaker institutions, increase reserves and improve their balance sheets.
But the total volume of loans outstanding from all banks fell about 1 percent, according to Federal Reserve data, declining more than twice as much among those that accepted taxpayer money. Some of the first to get funding, such as Citigroup and J.P. Morgan Chase, have reported the sharpest drops.
An irony that emerges is that depositors are shying away from big banks seen to be in bad shape and, encouraged by the increase in FDIC protection, putting money into weaker institutions that offer higher interest rates.
In the face of this bailout boomerang, members of Congress from both parties are now looking for ways to pressure recipients into making more loans, starting with more closely tracking how banks use the money they get.
Barney Frank, chairman of the House Financial Services Committee, expects the Obama Administration to pressure banks harder to increase lending, saying the initial bailout should have come with tougher conditions. He plans to hold hearings this week to push the effort.
This dispiriting picture raises larger questions about the "too big to fail" premise of the bailouts. So far results based on that assumption with a hands-off approach by the government have not been encouraging.
"The federal government," the Washington Post reports, "has invested almost $200 billion in U.S. banks over the last three months to spark new lending to consumers and businesses.
"So far, it hasn't worked. Lending has declined, and banks that got government money on average have reduced lending more sharply than banks that didn't."
In the Paulson free-money giveaway, recipients have used government funds to merge with weaker institutions, increase reserves and improve their balance sheets.
But the total volume of loans outstanding from all banks fell about 1 percent, according to Federal Reserve data, declining more than twice as much among those that accepted taxpayer money. Some of the first to get funding, such as Citigroup and J.P. Morgan Chase, have reported the sharpest drops.
An irony that emerges is that depositors are shying away from big banks seen to be in bad shape and, encouraged by the increase in FDIC protection, putting money into weaker institutions that offer higher interest rates.
In the face of this bailout boomerang, members of Congress from both parties are now looking for ways to pressure recipients into making more loans, starting with more closely tracking how banks use the money they get.
Barney Frank, chairman of the House Financial Services Committee, expects the Obama Administration to pressure banks harder to increase lending, saying the initial bailout should have come with tougher conditions. He plans to hold hearings this week to push the effort.
This dispiriting picture raises larger questions about the "too big to fail" premise of the bailouts. So far results based on that assumption with a hands-off approach by the government have not been encouraging.
Wednesday, November 12, 2008
Making Book on Paulson
An editor once proposed a picture book titled "They Must Know What They're Doing or They Wouldn't Be Where They Are," featuring the captain of the Titanic, the designer of the Edsel, LBJ running the Vietnam war and other disaster-prone people in high places.
Add Henry Paulson to the list. After pushing Congress into a panic to let him buy toxic mortgage assets, Bush's Treasury Secretary today said maybe not, announcing the plan is on hold.
At a news conference, Paulson said the $700 billion will be used instead to bolster the financial markets and, in turn, make loans more accessible for creditworthy borrowers:
“During times like these with a slowing economy and some deterioration in credit conditions, even the healthiest banks tend to become more risk-averse and restrain lending, and regulators’ actions have reinforced this lending restraint in the past.”
Four federal agencies, including the Federal Reserve and the FDIC, joined in by issuing a statement practically begging banks to step up: “Lending to creditworthy borrowers provides sustainable returns for the lending organization and is constructive for the economy as a whole.”
Paulson's turning on a dime is analogous to what the Bush Administration might have done five years ago if, after getting Congress to authorize invasion of Iraq and starting the shock and awe, they suddenly decided to stop and bomb Iran instead.
No wonder, in the face of all this fumbling, the stock market keeps going down, waiting for a signal about where all this confusion is heading.
The naming of Obama's Treasury Secretary, along with a clear statement of intentions about the financial markets, gets more urgent with each passing day.
Add Henry Paulson to the list. After pushing Congress into a panic to let him buy toxic mortgage assets, Bush's Treasury Secretary today said maybe not, announcing the plan is on hold.
At a news conference, Paulson said the $700 billion will be used instead to bolster the financial markets and, in turn, make loans more accessible for creditworthy borrowers:
“During times like these with a slowing economy and some deterioration in credit conditions, even the healthiest banks tend to become more risk-averse and restrain lending, and regulators’ actions have reinforced this lending restraint in the past.”
Four federal agencies, including the Federal Reserve and the FDIC, joined in by issuing a statement practically begging banks to step up: “Lending to creditworthy borrowers provides sustainable returns for the lending organization and is constructive for the economy as a whole.”
Paulson's turning on a dime is analogous to what the Bush Administration might have done five years ago if, after getting Congress to authorize invasion of Iraq and starting the shock and awe, they suddenly decided to stop and bomb Iran instead.
No wonder, in the face of all this fumbling, the stock market keeps going down, waiting for a signal about where all this confusion is heading.
The naming of Obama's Treasury Secretary, along with a clear statement of intentions about the financial markets, gets more urgent with each passing day.
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