Even after TARP, credit is hard to come by

TARP or the Troubled Asset Relief Program that the government put in place to buy out equity and assets from financial institutions to strengthen the financial sector does not seem to be motivating enough for banks to lend more to the consumers.

David Ellis in his article “Big Banks Still Not Lending” touches base on the lending market. He mentions how the lending has gone down 7% since March. Some of the market regulators believe the reason for the decline could be a lower demand by the industrial sector. This makes me believe that banks have more faith in the industrial sector than the consumer market even though it is the taxpayers’ funds that constitute the TARP.

Banks stress on the fact that they are lending more but the consumers believe that it is still very hard to get credit.

In a different article “Economy in ‘early stages of repair’, Colin Barr mentions that Tim Geithner thinks the economy has started to recover and there is a noted improvement in the stock market, but there still maybe tough times to face in the near future. Could this fear of facing tougher times in the near future be the reason why banks are not lending as much? Who knows? I just can’t wait till Wednesday to see what the new ‘regulatory reform plan’ put in place by the Obama administration would do to make the financial sector more stable.

Will come back with more on the Regulatory Reform Plan soon,until then please feel free to leave comments.

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