The government hands a couple hundred billion to banks struggling to stay afloat and expects them to turn right around and lend it out? In this economy?
An impatient White House prodded banks and other financial companies Tuesday to quit hoarding billions of dollars flowing into their vaults from Washington and start making more loans.
The infusion of federal money is to rebuild banks’ battered capital reserves so the institutions would feel comfortable resuming more normal lending practices. But that confidence was undercut somewhat when reports surfaced that bankers might use the money to buy other banks. Indeed, the government approved PNC Financial Services Group Inc. to receive $7.7 billion in return for company stock on Friday and, at the same time, PNC said it was acquiring National City Corp. for $5.58 billion.
There is little federal officials can do about it. There is no language in the bailout bill that specifically obligates banks receiving money to increase their loans. Officials had argued that attaching strings to the capital-infusion program would discourage financial institutions from participating.
A quarter billion from our pockets to their vaults. With no enforcement mechanism to force the banks to even try to comply with the plan — which attacks the wrong problem to begin with. (It’s solvency, not liquidity.)
The mind reels. Truthfully: could an Obama administration really be any worse?