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« Previous Entry | Main | Next Entry » Where Is the Bailout Money Hiding? Name:
Jana
Question: You did a great job explaining where the money for the bailouts comes from. Can you now tell us where, exactly, it is going? If there are so many trillions of dollars sloshing about, how come the banks aren't lending and businesses are laying off employees? Where is all the bailout money hiding? Paul Solman: Back at the Fed! The banks are obliged to keep a cushion of deposits at the Fed, in the form of vault cash or Federal reserves. (Electronic cash of the Fed.) The bitter truth is that the banks have been REDEPOSITING the electronic money the Fed has been creating at the Fed. Why? Because banks are afraid to lend money these days - whether it's your or my deposits or the Fed's. And borrowers aren't clamoring for the money either. Not borrowers likely to repay. -- Posted April 13, 2009 | Comments (1) | Permalink
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This has been the problem with the bailout all along. Too much focus on banks, real estate and auto industry and not enough focus on creating strong consumers. People with good jobs will buy cars and houses and will need lending to do so. Banks will reorganize to serve this demand.
Unfortunately, Wells Fargo's $3B earnings number illustrates that the banks have been fixed, but it doesn't matter. If I'm afraid for my job, I'm not going to buy a new car. And that is what is happening to every consumer in America today.