the costs of capital? It’s not a grant; it’s going to have a cost, but none of that
is clear yet.”
Indeed, despite the billions injected into some of the nation’s largest
banks, lending has yet to resume in any significant capacity. According
to a Wall Street Journal analysis, 10 of the 13 beneficiaries of TARP
reported a decline in their outstanding loan balances by a total of
roughly $46 billion, or 1.4%, between the third and fourth
Many observers suggest that banks have been using the
funds to steady their own precarious positions. To be sure,
one of the goals of the program was to stabilize financial
institutions, but for the intended purpose of having
them lend money again.
Banks may be hesitant to dole out paper because
of the lack of federal guarantees, says Thomas J.
Bisacquino, president of the National
Association of Industrial and Office Properties.
The Herndon, VA-based executive likens the
situation to that of the insurance industry
immediately after 9/11, when companies
were reluctant to write terrorism insurance because they couldn’t price risk.
As it did then, Bisacquino says, the
government needs to step in to create
a federal guarantee. Were the government to do so, “there is plenty of
capital that’s on the sidelines that
would jump back into the market.
The money is just looking for
some confidence,” he says.
It’s yet to be seen whether
the Treasury’s stabil-