Treasury Secretary Geithner, who many members of Congress would like to see out of his job, yesterday said that tight credit could derail the nascent economic recovery. “Right now, the real risk we face is that banks are not lending enough and not going to provide the capital that businesses need to grow for the economy to strengthen going forward,” he said in an interview on National Public Radio.
Geithner’s trouble is that no one in the Administration or Congress has come up with a solution to the problem.
The weakness of almost all the current stimulus packages is that they try to stimulate industries such as broadband infrastructure by providing capital in the hope that those industries will hire people using the government’s money. So far, that has not turned out to be true. Unemployment is still rising and the Administration’s plan to create or save 3.5 million jobs has not borne fruit at all.
The government has refused to bully banks into lending money, even those that received TARP funds. Congress and the Administration have also neglected to provide money to banks which is earmarked to go directly to business lending with the government bearing some of the risk of bad loans.
Geithner’s view of the greatest risk to the recovery is completely accurate. The fact that he has not pushed a solution is both a mystery and a potential tragedy.
Douglas A. McIntyre
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