Is the Bailout Over?
by Tom on November 4, 2009
in Market Musings, Videos, banks
Not so fast…..
Remember last fall, when our government explained that the reason we needed to give $800 billion to Wall Street was so the banks could lend it back to us and shock the economy back to life again?
That was a happy story!
What happened, of course, was that the banks took the money, stopped lending, and used it to pay themselves and their shareholders through the nose.
Twelve months later, the banks still aren’t lending, and we’re still bailing them out hand over fist.
By lending the banks money at zero interest rates, the FT’s Martin Wolf says, the Fed is helping the banks recapitalize themselves. The banks aren’t lending because they’re still trying to recover from all the lousy loans they made three years ago (and because there aren’t all that many folks to lend to). So there’s nothing else to do with the money other than hoard it, buy safe Treasuries, and pay huge bonuses.
It’s annoying to watch banks that would have collapsed a year ago now minting money at taxpayer expense. But that’s the way monetary stimulus always works.
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