As Ive said in another thread the distinction to be made is between lending for liquidity’s sake (necessary for the economy) and lending for leveraging sake (enhancing returns on investments in a rising market).
The bank/govmt’s strategy is to increase the former, without over doing the latter. Most of the public dont discern between the two an come to the vitriolic response as above. The mechanism they are using is reducing the cost of funds to the banks to mean that a higher proportion of their interest earned is “profit” rather than simply pass through cost of funds. “Printing money” is the other method and is supposed to increase the capiacty of the banks to lend, not just the profitability of the banks.
Im not wholly sold on this yet, but then no-one in the world has seen it work in the past 🙂
I would prefer to see 100% loan guarantees for all new business loans instead. And also let some banks fail rather than prop up negative net book values with tomorrow’s tax receipts. Dont buy the line that the taxpayer is going to get their money back – if there was money to be made out of toxic debt, the private sector market would be in their like a shot – and they arent! 🙂