I experienced a small sign of economic spring Tuesday morning. While making a routine transaction at my neighborhood US Bank branch, the teller asked me: "Would you be interested in a loan or a credit card?" Clearly, someone in bank management had decided the lending spigot should be reopened, at least to those whose credit records seemed respectable. (By the way, I said no thanks).
For all the criticisms of the Federal Reserve/Treasury bailout of financial institutions — and they are numerous and in many cases justified — there are indeed signs that credit is beginning to ease and that loans are again being made. Several major banks also have voluntarily offered to restructure their customers' mortgage loans.
President-elect Barack Obama not only is having trouble selling his economic stimulus package to fellow Democrats in Congress. He also faced resistance regarding the second, $350-billion piece of the financial bailout, which President Bush requested on Obama's behalf. The $250 billion already allocated to the bailout, contrary to belief, was not "given" to the recipient institutions. It was invested in preferred stock now earning a 5 percent annual dividend. Some banks, it is true, have not lent the money but have used it to strengthen their balance sheets. But that has been a necessary precursor to lending. Without the money, many of them would have just plain gone under.
Phase One has involved saving the financial system. It is not yet over. But my bank branch's offer of credit is an early sign of thaw in at least one major financial institution.