If you have tried to obtain a home loan or credit card in the past several months, you may have noticed that standards have tightened since the days when pre-approved credit card offers would appear in droves in your mailbox.
The Troubled Asset Relief Program was envisioned as a way to help banks feel confident enough to go back to lending money to businesses and individuals who are seeking home loans and other types of credit.
However, three months after TARP was approved by Congress, banks remain hesitant to lend, according to former Federal Reserve vice-chairman Alan S. Blinder.
He told Bloomberg that financial institutions are “just sitting on the capital” in order to appear strong to investors.
However, he added that “if you’re taking money from the public purse, we should get something in return – and we’re really not.”
In fact, in recent months many lenders have been cutting back even further on customers’ credit, by slashing credit limits and cancelling unused cards.
Part of the problem is that no one can agree on exactly how much government intervention there should be in banks’ operations.
On one hand, every taxpayer is a stakeholder in these institutions and should expect loosened credit, but on the other hand many people are uncomfortable with government influencing the behavior of private companies.
But one thing seems to be certain – the effects of TARP are still not being seen by the average consumer, and this does not bode well for the overall economy.
Similar Posts:
Recent Comments