Treasury Finds No Rise in Bank Lending
This article, titled "Treasury Finds No Rise in Bank Lending", quotes the Treasury Department of saying that the largest recipients of the $700 billion stimulus plan did not increase lending to consumers in the last three months of 2008. Actually the lending in the last quarter of 2008 was stagnant or declining, even with the "$250 billion capital-injection program" in place to stimulate lending. As was talked about in class, these banks that are receiving the funds from the TARP program are for the most part keeping them to make their own books look good rather than lending the funds out to stimulate the economy as was originally intended. This hoarding problem has Congress pressuring the Treasury Department to find out what is going on with the funds given to banks. If the banks are using taxpayer dollars to make themselves look good, instead of loaning the funds out, the stimulus plan is, for the most part, ineffective. What are some possible solutions to this problem? The Government could put in place a contract with the banks to require them to lend out a certain percentage of the funds within a specified period. Another solution could be increase incentives (such as low interest rates) for potential home buyers to take out mortgages. In any case, the bank side of the stimulus plan is not working so far, so the Treasury Department and those in charge of this section of the plan must step back and re-evaluate their strategy.