Given the current economic climate, it's not much of a surprise that the nation's banks are lending less. But here's a sad verdict on the TARP: According to a Washington Post analysis, banks that have received the Treasury Department's billions are lending less on average than banks that didn't get taxpayer money [1]. To be precise, a recent Federal Reserve analysis found that the volume of loans at banks fell about one percent in the last three months of 2008. The Post found a decline "more than twice as large" among TARP participants. As the Wall Street Journal reported last week [4], the biggest bailout investments have faired no better. Behemoths like Citigroup ($45 billion in TARP money), Bank of America (also $45 billion) and JPMorgan Chase ($25 billion) all saw loan volumes decline in the fourth quarter of 2008. |
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Surprise! They weren't...
How'd this happen? The program is voluntary, and the Post reports the strongest banks have tended not to participate. "Rather than investing in the banks best equipped to increase lending, the government invested disproportionately in banks that needed money to solve problems." The Treasury Department insisted with mantric repetition that only "healthy banks" would get in the door, but things have been nowhere near that simple: Plenty of ailing banks slipped through [3].Meanwhile, bailed-out banks are spending money on Super Bowl parties, corporate jets, office remodeling, and mergers. When the root of the problem was a lack of regulation, we gave away a stupid amount of money without oversight, expecting the same morons who screwed everything up to suddenly be struck by wisdom.
Surprise! They weren't...
