The Plebian

Pretty Economic Pictures for the Illiterate Masses

So how is the TARP working out?

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The big banks are not lending what was given to them.

Months into the grand bailout experiment and the creation of the TARP, the politicians that supported the measure have clearly demonstrated their incomptence.  Initially, TARP was designed to release credit and facilitate lending that had frozen.  The outcome so far? (1) the bill has done nothing to protect the financial health of average Americans and (2) banks have reaped in excess reserves. 

Within a few weeks of passing the TARP in early October, it was clear that the world markets were skiddish about the effectiveness of the program.  But the truth of the matter is that the TARP has been but one measure that the Federal Reserve has used.   In reality, the Federal Reserve has extended bank credit to the tune of $2.3 trillion and committed several trillion more. 

Reserve bank credit

This unprecedented expansion of reserve credit was designed to kick start the economy by encouraging lending.  However, this has hardly been the case and was fairly predictable since the  alot of American consumers no longer have the means to borrow at interest.   So what was the motive for giving multi-national banks billions in reserves?  Are we really to believe that the solution to too much debt is to issue more debt?  There is no logic between their stated goals and how they are seeking to achieve such goals.  As always the proof is in the numbers. In the world of reality, the banks are not lending, but rather just sitting on the loot given to them by the American taxpayers.

In the past few months, banks have been putting their taxpayer gifts in the safe bets, note how U.S.  3-month treasuries had a brief period of negative interest rates and were still being bought.  The excess reserves ( to the tune of over half a trillion) have not been lent to small businesses or those seeking refinancing, but rather they have been horded by the very douchebags that got everyone into the mess by speculating on deritives and creating exotic mortgage packages.

These large financial institutions are likely biding their time and will use these funds to buy up failed companies at bargain prices.  The game of Monopoly goes on.

The large banks have been offered free money from the taxpayers with few strings attached and of course they took it.   And now that they have it, why would they loan it out to someone as risky as average Joe American?  If this corrupt system is allowed to continue, average Americans will only find their financial situation continue to become more dire throughout 2009, while a few at the top of the banking cartel reap the benefits. 

I wonder at what point, if ever, the American populace will realize how badly they’ve been screwed by a bunch of greedy crooks in fancy suits.


Written by eastwood24

December 23, 2008 at 5:34 pm

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