In Switch, 'Real Economy' Hits Big Banks

Slumping profits are 'payback' from Main Street whipped by bad practices
By Harry Kimball,  Newser Staff
Posted Oct 19, 2009 9:49 AM CDT
Pedestrians walk past a Bank of America branch in San Francisco.   (AP Photo)
camera-icon View 2 more images

(Newser) – Those concerned about the nation’s banks should forget about the “softly, softly policy” of the Obama administration that has allowed Goldman Sachs to go back to business as usual in spectacular fashion. The real problem, Paul Krugman writes, is banks like Citi and Bank of America that are still floundering despite taxpayer largess. And the calculus remains the same: “Heads they win, tails the rest of us lose.”

Citi and BofA may seem peculiar, in that they quickly announced profits earlier this year and paid back TARP funds. Part of that was “a figment of the accountants’ imaginations,” Krugman writes in the New York Times, but the real problem is, well, real. “We’re looking at payback from the real economy,” Krugman writes. “In the first phase of the crisis, Main Street was punished for Wall Street’s misdeeds; now broad economic distress” is hitting banks where it hurts, and they’re still not lending, “helping to perpetuate that economic distress.”