Banks Still Not Lending

One of the last acts of the Bush administration was to give banks a multi-billion dollar bail-out. The intent of the huge bailout was not just to save banks, but to loosen credit and get the banks to lending again. So far, it hasn't worked.

The banks took the money, but instead of loosening credit and starting to lend again, they gave billions of dollars in executive bonuses, threw lavish parties and hoarded the rest. We should have known that's what they would do, because the Bush administration didn't set up rules for using the money, and in fact, couldn't even trace what happened to most of it.

The Federal Reserve released their latest survey of banks yesterday, and it was not good. Instead of loosening credit and lending, most banks last month tightened their credit even further. They made it even harder to borrow. Even the few who didn't tightened loan standards were raising the rates for their loans.

This is not the way it was supposed to go. Before another penny is given to these (or any) banks, rules must be created and imposed. There is simply no point in bailing out the banks, if they aren't going to do their part to bailout the economy in general. Both small and large companies need credit. Without it, they have to begin laying off even more workers.

Loosening credit won't solve all of our economic woes, but it is a necessary piece of the solution.