MAIN STREET-WHERE IS THE MONEY

can we make A RECESSION PAINLESS ? Part 1

The federal gov’t has agreed to spend $300 plus billion on bailouts of various companies plus $750 billion to ease banking liquidity. This does not include $160 billion economic stimulus payment with talk of another stimulus program probably as much or more. This is in addition to a $417 billion budget deficit.

However what is happening is that the large banks are sitting on the public money to protect against their own losses or if financially well off they are looking to acquire banks or their assets at bargain prices. .

Now a new complication. On Nov. 3, 2008 the Federal Reserve reported its latest quarterly survey of bank lending practices.
The Federal Reserve said that “a high number of bank reported they had made it tougher to borrow across a broad range of loan products”. 60% of the banks had tightened credit card debt, 80% had tightened business and commercial loans. 95% raised costs for lines of credit to large and medium size business. 50% of domestic banks said they ”were somewhat or much less willing” to make consumer installment loans This report was for Oct. 1-15th.. Financial help is not rapidly getting to main street.

Perhaps some of this tightening was needed. But, we must be careful not to repeat one of the great mistakes of the 1929 Great Depression. According to Milton Friedman, in reacting to the speculation at that time, we tightened credit too much and stifled the economy.