Banks Relish Public Funds, Won't Loan to Public

By Mary Papenfuss,  Newser Staff
Posted Jan 18, 2009 7:35 AM CST
Banks Relish Public Funds, Won't Loan to Public
Good luck getting loans out of Bank of America after US taxpayers pump in billions.   (AP Photo/Damian Dovarganes)

Banks are enjoying a public bailout of billions of dollars, but they're not using the funds the way the way they were intended—to loan money to kickstart the economy, reports the New York Times. Banks are using the bucks to pay off debts and, in some cases, acquire companies. “Make more loans?” asked one incredulous bank president. “We’re not going to change our business model to accommodate the needs of the public sector."

Many banks, which do not have to disclose how they are using the taxpayer money, are reluctant to lend out of fear they will be in worse shape if the economy deteriorates. Treasury Secretary Henry Paulson said in October that banks should “deploy, not hoard” the money to increase lending, but there is no obligation that they do so. A report by a congressional oversight panel concluded it's not clear how the bailout “advances the goal of financial stability and the well-being of taxpayers." (More economy stories.)

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