Fed launches program to boost consumer credit

[JACKDRUID]

Consumer Credit Program

Finally! time for a new (hybrid) car

 

[StageLeft]

Sweet, just in time for some vacations n' sh*t from best buy I've been in bad need of.

 

[daveymark]

excellent, I've been thinking about getting an SUV, I like to feel safe on the road when I'm picking up groceries. plus with gas prices so low it's a no brainer!

 

[child of wonder]

Spend you fools! Spend! Muahahahahahahaha!!!!!!

 

[dullard]

Too bad it is the fed and not the federal government. I just don't understand our current federal government logic.
1) We have money that we want to use to stimulate spending.
2) We have people and businesses that need loans and can pay them back.
3) So, we give the money to banks and hope they lend. It fails miserably.

Does someone other than me see a more direct solution? If the federal government loaned money to buisinesses and consumers we'd go from #1 to #2 directly. Both problems are solved. Put a time limit of 2 years on the loans, non-renewable, if you are worried about nationalizing the banking system.

 

[StageLeft]

Originally posted by: dullard
Too bad it is the fed and not the federal government. I just don't understand our current federal government logic.
1) We have money that we want to use to stimulate spending.
2) We have people and businesses that need loans and can pay them back.
3) So, we give the money to banks and hope they lend. It fails miserably.

Does someone other than me see a more direct solution? If the federal government loaned money to buisinesses and consumers we'd go from #1 to #2 directly. Both problems are solved. Put a time limit of 2 years on the loans, non-renewable, if you are worried about nationalizing the banking system.

I imagine they totally lack the resources to handle direct-to-business lending, so they can only lend out huge sums to banks, as their volume of transactions is smaller and then let the banks loan out (or buy other banks, hand out bonuses, etc.).

 

[dullard]

Originally posted by: Skoorb
I imagine they totally lack the resources to handle direct-to-business lending, so they can only lend out huge sums to banks, as their volume of transactions is smaller and then let the banks loan out (or buy other banks, hand out bonuses, etc.).

That sounds like stimulus job creation to me. Plus, doesn't the SBA already do all this background stuff (loan analysis and approval for loans)? All they'd have to do is tack on collection of loan payments.

 

[BoberFett]

The economy is sinking because we've bought too much shit we couldn't afford for the past several decades and the answer is clearly... borrow more money to buy more shit.

This is why people laugh at economists.

 

[fleshconsumed]

"The program aims to help lenders securitize their debt. Banks package loans into securities and sell them to investors. The proceeds help banks fund more loans. But trust leached out of the system because of the credit crunch sparked by the subprime mortgage crisis and by a faulty method for measuring risk across asset-backed securities. For months, investors have been wary of buying securities backed by consumer loans. The TALF is supposed to fix the broken securitization market by reducing the risk to investors."

Isn't this what got us into this mess? Banks lending to people who can't afford, securitizing asset backed loans and selling them to investment banks, and when those investment banks failed, federal government had to bail them out?

The only difference in the new plan is that federal government now directly buys those ABS'es (and subsequently absorbs losses if any) instead of waiting for banks to collapse.

Brilliant idea.

 

[StageLeft]

The economy is just suffering a little confidence problem, folks, that's it. Nothing more.

 

[LegendKiller]

The program aims to jump-start the securitization market. Right now it is completely closed because nobody will take any risk, by giving some motivation to start buying, you'll see people be more willing to buy.

The government is buying the bonds at a discount of 5-15%, with the banks taking a first-loss in the bond.

There is nothing wrong with lending responsibly and this aims to start that again.

 

[alchemize]

Originally posted by: Skoorb
The economy is just suffering a little confidence problem, folks, that's it. Nothing more.

Don't you think some of the problem is now lenders are overally risk averse?

 

[KevinH]

Originally posted by: dullard

Originally posted by: Skoorb
I imagine they totally lack the resources to handle direct-to-business lending, so they can only lend out huge sums to banks, as their volume of transactions is smaller and then let the banks loan out (or buy other banks, hand out bonuses, etc.).

That sounds like stimulus job creation to me. Plus, doesn't the SBA already do all this background stuff (loan analysis and approval for loans)? All they'd have to do is tack on collection of loan payments.

Create that bureaucracy and it won't go away.

 

[LegendKiller]

Originally posted by: alchemize

Originally posted by: Skoorb
The economy is just suffering a little confidence problem, folks, that's it. Nothing more.

Don't you think some of the problem is now lenders are overally risk averse?

That is very true.