Wednesday, February 11, 2009

Make More Bad Loans?

Stressing that we “must get credit flowing again to businesses and families,” Treasury Secretary Geithner will now require recipients of TARP money to increase their lending activity and report to Treasury monthly on how their acceptance of TARP money “generate new lending” His remarks, released yesterday, are here

Do more lending? Are you kidding me? Banks are in the business of lending money, and will do so when it makes sense to do so (that is, they’ll lend when they have a good chance of getting it back). That’s the profit motive at work. Unfortunately, this whole mess is because banks got it wrong and lent money to people they shouldn’t have. We don’t need the Treasury now forcing banks to make new loans the banks wouldn’t otherwise make. I mean really. The problem isn’t people not being able to borrow money. The problem is getting people to spend money.

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