Three weeks after the $700 billion bailout, Kai Ryssdal of Marketplace chats with Doug Elmendorf about the bailout and who’s lining up to get their share.
Kai Ryssdal: The bailout package is all in American dollars, $700 billion dollars worth, as we know. The news today is that a number of smaller regional banks have signed up for federal cash. Also, that the big names that were strong-armed into taking their share a couple of weeks ago are finally getting their money. To chat about the bailout and who’s lining up to get their share we’ve called economist Doug Elmendorf at the Brookings Institution. Welcome to the program.
Doug Elmendorf: Glad to be here.
Ryssdal: Here we are three weeks after the bailout was signed into law and just this week we are getting the first injection of cash into these banks. How do you feel about that?
Elmendorf: I think the credit situation has improved a little bit, and hopefully will improve much more when the money starts to flow. But that still leaves us with very large financial and economic problems.
Ryssdal: Well give me the top three then.
Elmendorf: Number one: banks aren’t lending to households and businesses that need money and are used to being able to borrow. And that contraction in lending is leading to number two: recession. We are going to see declines in output and incomes, and increases in unemployment. Number three problem, is rising mortgage foreclosures that are in some ways at the heart of the financial problem, but will require attention directed at foreclosures themselves.