More Cash for the Banks..... or the Economy Crashes?

The banks are saying that they need more cash or the economy gets it.

Banks have received $200 billion in fresh capital from the Treasury since last fall and have borrowed hundreds of billions of dollars more from the Fed. But in the meantime, the economy fell into a severe downturn last fall that is likely to continue until at least this summer.

Industry analysts estimate rising unemployment and business failures will lead to another $500 billion to $750 billion of losses in coming months. That could bring total losses from the credit crisis to $1.5 trillion to $1.8 trillion, twice as high as earlier estimates.....

“More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets,” Mr. Bernanke said in a speech to the London School of Economics.

Mr. Bernanke, tacitly acknowledging the unpopularity of the bailout program, said the public was “understandably concerned” about pouring hundreds of billions of taxpayer dollars into financial companies — especially when other industries were getting the cold shoulder.

But, he insisted, there was no escape. “This disparate treatment, unappealing as it is, appears unavoidable,” Mr. Bernanke said. “Our economic system is critically dependent on the free flow of credit.”

Yet giving the banks money hasn't allowed credit to flow, because the bankers are using the money to snatch up assets and consolidate their grip on the US economy. And at the same time, look at the shaking down that the auto industry had to go through to get credit that wasn't available in the market because banks weren't lending the money that taxpayers let them borrow to "get credit flowing."

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Obama threatened veto too

Isn't this just astounding? We have 8 trillion out there, no accounting for any of it and Obama is threatening a veto if he doesn't get the rest of the $350 billion.

I'm sorry but the indicators to me are looking much worse than I assumed during the election (hence my poll question).

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How about both

A quick look at the Fed's H.3. report will show you that in December, the Fed injected $219 bn into the banks through an expansion of the monetary base. The banks promptly increased the amount of reserves held at the Fed by $208 bn. That was effective. Inquiring minds want to know just who let that $8 bn slip out the door? Tsk, tsk, such sloppy cash control. And the Treasury's injections of cash into the banks are supposed to be so much more effective than the Fed's because...? What has Ben been sniffing? He knows the numbers just as well as I do.

The exact same thing happened in Japan during the "lost decade" after their housing bubble burst. The Central Bank injected tons of money into the banks, swelling reserves, but not cash flow. I guess the Japan experience is not relevant to the US because, well, we're the US and it works if we do it? Hello, Mr Bernanke, hello. Anybody home? The lights are on, but nobody seems to be there.

Japan also embarked upon a decade of government spending on physical infrastructure that failed to pull their economy out of the doldrums. Now we're going to do the same thing, but it's going to work for us because we're the US. The more I hear, the more convinced I become that our economy will be a shambles for the next decade, if not longer. Productive investment is much more than just pouring concrete.

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More Bail Failures Predicted, right on cue

Now they are predicting more bank failures for 2009.

I find this suspicious since the $350 Billion TARP money is meeting resistance in Congress, so magically we get these sorts of "reports".

As noted in the bail out Senate fight, Larry Summers is claiming $50 - $100 billion of the additional $350 billion will go to "helping homeowners" but it is couched in that there is no specifics to set up a program to directly help the homeowner.

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