White House tells banks to stop hoarding money

[grateful1]

WASHINGTON – An impatient White House served notice Tuesday on banksand other financial companies receiving billions of dollars in federalhelp to quit hoarding the money and start making more loans.

"Whatwe're trying to do is get banks to do what they are supposed to do,which is support the system that we have in America. And banks exist tolend money," White House press secretary Dana Perino said.

Though there are limits on how much Washington can pressure banks, she noted that banks are regulated by the federal government.

"They will be watching very closely, and they're working with the banks," she said.

AnthonyRyan, Treasury's acting undersecretary for domestic finance, made thesame point in a speech in New York before financial executives.

"Asthese banks and institutions are reinforced and supported with taxpayerfunds, they must meet their responsibility to lend, and support theAmerican people and the U.S. economy," Ryan told the annual meeting ofthe Securities Industry and Financial Markets Association. "It is in a strengthened institution's best financial interest to increase lending once it has received government funding."

Said Perino: "The way that banks make money is by lending money. And so, they have every incentive to move forward and start using this money."

There has been some evidence of easier lending, Perino said. But it's not enough to calm stock marketsor help small businesses that depend on a free flow of credit, not justto expand but to maintain operations through making payroll orfinancing inventories.

The governmentis making efforts on several fronts to thaw the frozen credit marketsand combat the worst financial crisis to hit the country since the1930s. But so far, the efforts have shown little in the way of results.Libor, the London Interbank Offered Rate, a key goalpost for international lending, edged down only marginally on Monday and still remains at elevated levels.

The Federal Reservebegan a program Monday to purchase the short-term debt of businesses,known as commercial paper. This market has been frozen since thecollapse of Lehman Brothers spooked credit markets last month.

Under the authority of the $700 billion financial bailout plan approved by Congress and signed by President Bush earlier this month, the administration also plans to dole out $250 billion to banks in return for partial ownership. The Treasury Department,which is overseeing the massive capital injection program along withthe rest of the bailout, will pour $125 billion into nine of thecountry's largest banks this week. Another $125 billion will go toother banks.

Treasury Secretary Henry Paulsonhas said the money was aimed at rebuilding banks' reserves so that theywould resume more normal lending practices. But reports then surfacedthat bankers might instead 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 and, at the same time, PNC said it was acquiring National City Corp. for $5.58 billion.

Officials have said that there are few strings attached to the capital-infusion program because too many rules would discourage financial institutions from participating.

 

[Atlasm]

Yeah dammit stop the hoarding, I need that loan to finance building my home made out of cigar boxes! :whistling:

 

[ironpeddler]

Gee, I'm totally shocked.... :whistling:

 

[Nimrod]

So why do the buy-outs if this is all they would do?

Bankruptcy for these businesses seems the better route.

 

[sack]

I'm sure a beaurocrat telling a banker what to do is the wisest choice. Let''s see, the bank starts giving loans out indiscriminately and the lendees goes broke and now the bank is out of business. The reason no one is lending out money is because no one knows what the portfolio of the other guy is really worth. As much as i hate to say it, the banks know who to loan to, it's why they are in business.