Obama Will Require Banks to Expand Lending as Condition for Aid

[stevedeshazer]

Source: Bloomberg.com

By Alison Vekshin and Rebecca Christie

Feb. 2 (Bloomberg) -- President Barack Obama will require banks to boost lending to consumers and companies in return for taxpayer aid from the $700 billion bailout fund, in a departure from Bush administration policy, a key lawmaker said.

“You’re going to see the Obama administration,” learning lessons from the first phase of the program, “push for much more lending,” House Financial Services Committee Chairman Barney Frank, who helped write the financial-rescue law, said yesterday on ABC television’s This Week program. “There are going to be some real rules in there.”

Obama will include the restriction in a bank-rescue strategy he is expected to announce in coming weeks, responding to congressional criticism that firms receiving funds from the first $350 billion instalment failed to pass on the aid. Obama last week blasted Wall Street executives for paying bonuses, and reports showed some aid helped recipients to finance mergers and acquisitions that may lead to job cuts.

The administration and top Democratic lawmakers are seeking to differentiate the next stage of the financial bailout in order to insulate against popular opposition to a Wall Street rescue. Lawmakers are questioning the effectiveness of the Troubled Asset Relief Program they enacted in October, saying the Bush team’s decisions on deploying the first $350 billion did little to stabilize the economy.

Read more: http://www.bloomberg.com/apps/news?pid=20601068&sid=a8mVjojniVQk&refer=home

[DJ13]

1. How long wasting time & how much taxpayers money before they

just understand that the banks wont ever operate normally until the government nationalizes them?

[BlooInBloo]

3. Not counting all of that time between FDR and Reagan, I guess you mean.

[anonymous171]

13. I think just the threat of nationalization will get them to comply.

[corruptmewithpower]

2. I hope Congressman Frank is serious.

It appears the Bush admin got about zero bang out of 350 billion bucks. That's a heck of a lot of money spent for no discernable effect.

[DUlover2909]

4. Erin Burnett said today on Meet the Press:

that the "bonuses" are actually compensation for those employees at the banks that happened to turn a profit in their particular duties within the company. Employee A lost 2 billion, but employee B made 1 billion. That's a net loss of 1 billion, but they are contactually bound to reward employee B for his accomplishment. By her reasoning then, employee B deserves the "bonus." But I have a follow up question: Without the government bail-out, would the company have been able to pay the "bonus"? If not, then the "bonus" should never have been paid. She tried to seperate the two pools of cash. Companies really only have one single pile of liquid cash, not two.

[Athens30603]

5. I knew that's how they would play that. n/t

[kurt_cagle]

6. Bonus paid on pre-bailout profits?

That's a fairly idiotic argument. Overall bonuses at most companies I've ever worked are paid out of the overall profits. You may have scored the deal of a lifetime, but if the company lost money, then you do too. The existing setup is basically to insure that their golden boys and girls don't decide its better to go off an work as an independent hedge fund manager, or go to a company that does pay based upon absolute sales. Personally, though, this is where you get into some truly asinine situations - without the common pool, there is no incentive for one broker to help another make sales, and consequently far less oversight.

My suspicion is that one of the changes that the SEC brings about is the requirement that bonuses are paid out of a common after-tax pool, not just for financial brokers, but for any employee who is eligible for bonuses. Not only will it reign in excessive bonuses, but it will also significantly curtail the incentive for companies to pay their executives with outside the accounting box mechanisms, and shifts the payment strategy away from stock price manipulation (which can often provide deceptive guidance concerning the real health of a company) and towards true profitability.

[cap]

8. nobody is going anywhere these days

there's no work... so bonuses are a non-issue.

In fact, there is a cramdown on contractors in the works.

[jpak]

11. Erin Burnett dates those "employees" and enables their crimes

She is not an impartial voice

[liberal N proud]

7. The fact that it wasn't the first time is proof that the bailout was a heist

A heist like we have never seen before. The bu$h regime had one purpose behind the bailout, the rich get richer at the expense of the rest of us.

[Baby Snooks]

9. It's a little late...

The majority of Americans at this point don't qualify for a loan. Particularly the ones who are on unemployment and on their way to living under a freeway overpass.

The reality of both bailouts is they do not help anyone but the people who created the problem to begin with.

I hate to say it but I really have given up on Barack Obama. He is, in the end, just like the rest of them.

[Romulox]

10. Err, didn't Obama ENTHUSIASTICALLY support the no-strings TARP bill in the first place?

Nice bit of triangulation, this.

[Titonwan]

12. Well DUH...

It should have been that way from the get go. Buy a clue, people, the money is GONE and in offshore accounts by now thanks to Paulson, Bernanke and Junior. Later (when this depression drops like a hammer), while you're eating your favorite poodle Fifi, they'll be dining on caviar and champagne- SMIRKING AT YOU. You stop pursuing justice against them, you deserve everything that's coming. Oh and it IS coming!