Thursday, April 22, 2010

Federally assisted banks reduced lending and gave bigger raises

Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn't get aid, a USA TODAY/American University review found.

The reduction of credit during the worst of the recession raises questions about whether the $247 billion assistance program achieved one of its primary goals: to stimulate the economy by reviving the flow of credit to businesses and individuals . .

- Lending fell. The amount of loans outstanding to businesses and individuals fell 9.1% for the 12 months ending Sept. 30, 2009, at banks that participated in TARP compared with a 6.2% drop at banks that didn't.

- Employee pay rose. Average pay at banks getting aid rose 9.4% in the program's first year. By contrast, non-TARP banks increased salaries 1.8%.

- Cost-cutting limited. Banks in TARP cut costs less than those outside the program. Government-aided banks increased branches by 2.7% while non-TARP banks cut branches by 1.2%.

You can blame greedy irresponsible bankers for being greedy irresponsible bankers.

But, the lion's share of blame for the faults in the bail out program belongs to the stupid politicians in Washington who gave billions to greedy irresponsible bankers without sufficient conditions and controls.

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