The Journal ran today with news (sub. req., or via Reuters) that $148 in bailout money hasn’t been able to restart lending at thirteen of the country’s biggest banks. And Bloomberg says banks without federal money are lending more than banks on the dole. Maybe that other $350 billion could loosen things up?
Alert Banker and Tradesman readers know the score. Back in December, Jay Doherty, president of the development firm Cabot, Cabot & Forbes, told me: “Banks are using cheap capital to rebuild their balance sheets. They’re trying to rebuild from their losses and from their bad loans. It’s ironic that monetary policy has been set to encourage them to lend, and it’s brought about an opposite set of behavior. … I compare it to 1989-1990. The Fed lowered the cost of capital, and banks retrenched their lending and started to weed out their bad loans. They put out money expensively and securely.”