A new analysis from the Wall Street Journal today seems to confirm the worst nightmares that the government’s financial rescue programs would turn out to do nothing more than pour taxpayer money into zombie banks who would hoarde capital rather than lend it into the economy. According to The Journal, Journal, the biggest recipients of taxpayer aid made or refinanced 23% less in new loans in February than they did in October.
Recall that October was the month after the collapse of Lehman supposedly froze the credit markets and it was the month when the government launched Troubled Asset Relief Program.
Some quick data points from the Journal’s analysis:
- The total dollar amount of new loans declined in three of the four months the government has reported this data.
- All but three of the 19 largest TARP recipients originated fewer loans in February than in October.
Why isn’t this drop in lending more widely known? Mostly because the way the Treasury calculates the pace of lending understates the problem. The Treasury measures the median performance of the banks. This way of measuring lending from banks winds up missing the zombifying effects of bailouts, where banks are encouraged to hoarde capital in order to bolster their financial health rather than lend out money injected by the government.
Here’s how the Journal breaks down the lending from each bank. Notice who is on top with the biggest decline in lending? That’s right, Goldman Sachs, the Wall Street firm that suddenly declared it had enough to pay back the TARP.
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