US Pushes Banks for More Lending, Less Spending

Officials drafting guidelines to encourage banks to loan their bailout cash
By Clay Dillow,  Newser Staff
Posted Nov 11, 2008 12:07 PM CST
Treasury Secretary Henry Paulson speaks during a news conference at the Treasury Department in Washington, Monday, Oct. 20, 2008.   (AP Photo/Gerald Herbert)
camera-icon View 1 more image

(Newser) – Officials from several US banking regulators are finalizing guidelines for financial firms that will encourage them to lend more and curb executive pay, the Washington Post reports. The Treasury is taking $250 billion in equity stakes in various financial firms, but critics complain the firms are passing the taxpayer money along as shareholder dividends, paying top officers, or acquiring rivals rather than lending the money as intended.

The primary goal of the guidance is to increase lending and unfreeze credit markets, and it will be applicable to all financial firms, not just those receiving government assistance. Compelling banks to lend can be dangerous, critics say, as it can force them to make bad loans. Banks may now pass on more than half of the money they get from the government as dividends rather than lending it.