$173B Later, Taxpayers Still Can't Get a Loan

Consumer credit remains frozen, even at banks flush with bailout funds
By Clay Dillow,  Newser Staff
Posted Jan 6, 2009 10:09 AM CST
Treasury Secretary Henry Paulson reversed course on the bailout, deciding to recapitalize banks rather than buy up their bad mortgage debt. Now, the banks have the money, but lending is frozen.   (AP Photo/Stephen Chernin)
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(Newser) – Though US taxpayers own $172.5 billion of shares and warrants in 208 financial institutions, most of them still can’t get a loan. Interbank lending rates have fallen since TARP funds have been paid out, but consumer lending remains tight and average credit card rates are virtually unchanged from October 2007, Bloomberg reports. "If you’re taking money from the public purse, we should get something in return, and we’re really not,” says an econ professor.

“Right now there is no new lending, and without new lending it’s going to be difficult for the economy to recover,” adds an investment banker. Others say forcing banks to make loans is akin to mandating subprime lending. “What is going to get us out of this recession is sound lending to people who are going to pay it back, not throwing money at people who can’t,” a banking group executive said.