Busted: Bankers and The Global Economy

January 17, 2009

FDIC Tries to Force Consumer Lending

The federal government has been closing in on ways to entice or force bankers to loan money to consumers, especially in exchange for financial assistance. Previously, taxpayer money has been used to prop up the banking system without any conditions.

attempt to enforce bank lending

attempt to enforce bank lending

The FDIC board announced that it will soon propose rule changes to its Temporary Liquidity Guarantee Program to extend the maturity of guarantees from three to up to 10 years where the debt is supported by collateral and the issuance supports new consumer lending.

Interestingly, the FDIC created this program last November to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued unsecured debt. This is an effort to use a carrot to encourage banks to renew efforts to make loans to consumers and then contractual obligations to enforce lending. ~ E. Manning


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