Governments financially propping up banks to boost lending

From Wikinormous

An interesting aspect of the awkward symbiosis between governments and banks of privatizing profits and nationalizing losses is the policy that governments should provide financial aid to banks to boost lending.


If one buys the privatize-profits-nationalize-losses-mantra such policies may seem to make sense: Banks are meant for lending and if state cash injections lowers the level of fear of the banks so they will start to lend, then such cash injections looks reasonable, even progressive.


If one does not buy the mantra, then such governmental policy becomes almost obscene. In a comment on his blog, Michael Rivero criticizes the policy within a longer comment about Barack Obama's financial politics:


"... you don't fix an economy by taking money from the working class to give to the banks
to loan back to the working class (at interest)."


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