Tag Archives: Bailout

How The Government Can Quickly Stimulate the Economy

Entrepreneur Magazine once published an article entitled “Where to Get a Small Business Loan“.

These are tough times for a small business (or any business for that matter) to borrow money.  Why?

Strange as it seems, our government has not given the banks any incentive to lend money to new and old businesses.  The banks can borrow from the Federal Reserve at three quarters of one percent and lend to consumer credit cards at 19- 29%, or just buy no risk Treasuries and make a couple of points.

A primary stimulus for the economy is getting small businesses funded again.  If the government was serious about forcing the banks to issue credit and getting the economy rolling again, then they would have created a formula that would penalize the banks for not issuing loans.

It’s simple: If the penalty were large enough, the banks would have to take the risk and lend the money.

Simply put, just taxing the banks does not create the loan incentives needed to re-energize the economy.  After all, why did the taxpayers bailout the banks, if not to help the economy in the first place?