It Makes You Wonder

When Washington announced plans to spend billions of dollars in the fall of 2008 to bail out the beleaguered financial sector, one goal, according to the New York Times, was to "encourage the banks to resume lending to one another and to customers." Yet as the following Wall Street Journal article, "Bailout Missed Main Street, New Report Says," makes pretty clear, we have yet to see the desired results:

Loans to Small Businesses Dropped at Double the Overall Rate, Claims Watchdog Group; 'Lending Is Not Springing Back' Wall Street Journal

Government funding to U.S. banks has done little to ease the credit crunch for small businesses—and the situation doesn't seem to be improving, according to a new report.

The value of large banks' loans to small businesses shrank 9% between 2008 and 2009, more than double the 4.1% drop for overall lending, said a report released Thursday by the Congressional Oversight Panel, a group set up to oversee funds allocated by the federal government's Troubled Asset Relief Program.

"Big banks pulled back on everyone, but they pulled back harder on small businesses," said Elizabeth Warren, chairwoman of the oversight panel, in a discussion with reporters.

The U.S. Treasury Department's TARP programs, launched during the depths of the financial meltdown, didn't improve access to credit, the report claims.

"Treasury never required banks to lend their new money," said Ms. Warren.

The squeeze on small-business credit "has been and remains a serious economic challenge," said Gene Sperling, counselor to Treasury Secretary Timothy Geithner, in an interview. "There's also little question that the crisis, the economy and small business lending would have been far worse without the swift and significant financial rescue efforts."

Based on the Treasury's own research, smaller banks that took capital from the rescue efforts showed stronger small-business lending than comparable small banks that did not, Mr. Sperling said.

The oversight panel didn't include this data in its report, but said that small-business lending values at the smallest banks fell by about 2.7%, compared with a 0.2% decline in their overall lending.

The oversight committee's report said it's unclear whether lending has been constricted more by a lack of lenders or a lack of borrowers. Businesses cautious about piling on additional debt in the recession have been reluctant to seek loans from banks, the report explained. Meanwhile, underwriting standards at banks have tightened so much that small businesses, which are considered to be riskier investments, can't squeeze through.

"Banks are lending less and less. What we hoped was 2009 was a trough, but lending is not springing back," Ms. Warren said.

My question is: Was the original rationale simply a lie, or is this another example of the law of unintended consequences where government policies are concerned? Either way, it makes you wonder why we call those people in Washington our "representatives."

Comments

[Marc Authier]

Nothing to wonder. You have to pay the fat bonuses to the Goldman Sachs pigs. It's not about saving entrepreneurs or smal entreprise it's about feeding the pigs.

[Rocky]

In my suburb, a small business that sold artistic objects to bored housewives failed after about six months in business. Should a bank have given it a loan to keep it afloat, so that it could pile up even bigger losses? The prior user of the space operated a personal trainer business which also failed during the Great Recession. Try to find a Walmart or a Sam's Club or a Costco and you have to drive 5 or 10 miles out of town. We are over stored, even at the high end. You can blame the banks for a lot of bad behavior, but I'm not sure they should be chastised for not making loans to small businesses that have no business being in business.

[the honor is gone]

Makes you wonder...can anyone look past the money when it comes to right or wrong?

Goldman Sachs dilemma

Dear T.P.: Goldman Sachs (GS -- $146) will sell anything to anybody, anywhere, anytime. If someone designs a better Port-O-John, Goldman will package it as a private offering, perfume it, tell buyers that removal of the waste product is booked as a loss and therefore treated as a tax deduction. I knew Gus Levy when he was chairman of Goldman until he passed in 1976. And if Gus were alive today, he'd turn over in his grave if he had any inkling of what Goldman was doing.

But not to worry. The SEC investigation is just a speed bump as Goldman and other Wall Street Banks collude to establish their New World Order. Your 77 shares of Goldman Sachs are as safe as if they were insured by St. Pete himself. If you have any doubt, just ask Warren Buffett, who now owns $8 billion in Goldman stock.

http://tinyurl.com/27jqt2j

[Tyler Eliott]

If the intended goal was sincerely to provide access to loans to small businesses and the private sector, the US Govt could have done one of two things. Either the Govt. could have established lending parameters and obligations to the banking sector FIRST as a condition for them to receive the funds, not AFTER the money was given, or the Govt could have established on their own, an Emergency Lending fund where small businesses and people go directly for low interest loans while bypassing the 'too bigs'. It is frustratingly obvious the Govt. had no desire to help Main Street. In 20 months, the US Government has not passed a single piece of legislation or Executive Order that makes life easier for everyday Americans affected by this crisis that didn't have strings attached.

[they want us under their thumb]

Why the 'Experts' Failed to See How Financial Fraud Collapsed the Economy
By James K. Galbraith
May 16, 2010
"Some appear to believe that "confidence in the banks" can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit. As you pursue your investigations, you will undermine, and I believe you may destroy, that illusion."
http://tinyurl.com/37ck6ow

[robert]

In answer to your question Michael, I'll go with Door #1.

[gordon]

They're making this up as they go. They told banks to take the money. A bank in Illinois took $83milin TARP and failed on Friday.
The bigger banks/bank holding companies gave the Fed junk collateral for Treasuries, and are collecting interest. They are told, or figured out,a risk-free spread on yield curve. They are told by FDIC of higher insur premiums coming, so they batten down the hatches. There is no reason on Earth they need to give risky loans to the next bead shop or tanning salon. Over-saturation/capacity of retail is everywhere. They should only support cash-flow positive businesses who need payroll/inventory loans to get thru the next 2 yrs. Now GM wants GMAC back-to issue sub-prime loans for autos. Ally isn't writing bad loans! Shame on them. If this is a repeat of easy credit and re-starting of collateralization (selling bundles of crap loans)to again dump on taxpayers, we'll need many Mr.Panzners speaking out.

[NOTaREALmerican]

Re: Either way, it makes you wonder why we call those people in Washington our "representatives."

It's to keep the peasants believing in "their" country.

Don't forget: If yer not runnin' a scam, ya can't make any money. The marks can't find out the game is rigged.

[Luke]

Quit using the term "Great Recession." It is by no means a recession but a depression and we are about to enter Phase Two. We have been in the eye of the hurricane amid all the tax incentives and giveaways which are no about to end. Without stimulus the economy tanks. I can see it creeping into the retail business where I work. April turned up, May turned down. Intense pricing competition while the price of goods increases to the business.
I have lost my "real" job, my home, my self confidence, my faith and my family. I work two jobs at minimal wage. I am disgusted by all that I see as it all crumbles around me shredding any dignity which I still possess. I now couldn't care if it will get worse as the life I knew is totally gone. At least others will learn the suffering I have encountered over the past two years.

[gordon]

This link sums up how the banks ripped off America and will guarantee you get sick and/or angry. (warning)
http://www.washingtonsblog.com/2010/05/700-billion-ha-real-costs-of-bailouts.html