Wednesday, October 15, 2008

Will the banks lend out any of the $125 billion of the government investment

The US government is persuading nine banks to accept $125 billion of government investment.But there is no guarantee of any of the money being used in such a way to ease the liquidity crunch as the government does not seem keen on getting any control of the management side of the bank to dictate how the money is to be spent, as the treasury is not seeking voting stocks for the money it is investing

There seems to be a good chance of at least some banks just hoarding the cash to shore up their balance sheets and the fed may not be able to do anything about it.

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