Its easy to hate the financial system that broke itself and most of the world, especially when they need even more or our money. They simply are not lending and the danger is an ever deeper world economic crises.
"The incoming administration and the Congress are currently discussing a substantial fiscal package that, if enacted, could provide a significant boost to economic activity," Bernanke said. "A modern economy cannot grow if its financial system is not operating effectively," Bernanke said during a speech at the London School of Economics. (via marketwatch.com)
Basically he is saying that the banks are central to the crises and if you dont fix them now this crises will get worse. Bush has already released the last half of TARP, about 350 billion and Obama has every intention of using at part of this for foreclosure relief.
Its clear that we are not sure how to spend this money. I like the Obama direction of simply investing in America and bringing its infrastructure into the 21st century, but that is long term and we are hurting in the short term.
Obama and the FDIC
Obama has assured Congress that a good deal of the new money from TARP Program would be used to help homeowners refi and escape foreclosure. The FDIC's Blair also has a plan to reduce mortgages and increase workouts so that they are performing according to expectations. Today, the mortgage workouts are redefaulting at an alarming rate of 50% within the first six months of the work out.
Bush, Bernranke and Paulson
The outgoing administration has refused to use TARP money for foreclosures, insisting that its key to shore up the banks, so that they will lend and companies facing a shortage of cash will be able to stay in business and people will pay bills.
Earnings are out for the banks and they are losing a lot of money because more and more are defaulting on credit and car loans as well as mortgages. Citigroup is now below $5.....sad that six months ago it was the largest bank in the world.
But Bernanke is warning Obama that most of the remaining $350 billion - and possibly more - has to go to shoring up banks if they are to resume lending at anything approaching normal levels. Whats not clear to me is, even if you continue to shore up the banking system, that they will loan. The money already given to banks has not really been used to keep the economy's wheels in motion, but for mergers and bonus's. Quite a pickle.....
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