Lack of Lending to American Consumers Precipitated by Governmental Seizure of Well-Capitalized Bank

(MMD Newswire) April 29, 2009 -- The New York Fed has released a report regarding liquidity hoarding which clearly implicates the cause of the current troubles Americans are having receiving loans with the arbitrary seizure of Washington Mutual Bank in September (Link below). As more information surfaces every day regarding the players involved in the financial crisis, it is clear that the decisions of regulators served only to worsen it. As the American economy continues to flounder as a result of the inability for businesses to obtain loans to grow and create new jobs, it has become clear that one of the key factors for a successful recovery is to remedy the unwillingness of large banks such as Bank of America (BAC), Citigroup (C), JPMorgan (JPM), Goldman Sachs (GS), and Wells Fargo (WFC) to lend money to businesses and consumers. As shown in the graph below from the report, it is clear that upon the seizure of Washington Mutual, interbank lending froze with an unprecedented increase in loan basis points. Simply stated, the banks started hoarding money which immediately transported the financial crisis from Wall Street to Main Street. Without the ability to move and lend money, the economy froze and began an immediate decline which is most cle...