This is a recession; bankers shouldn't be forced to lend (Thailand case)

The US Bank bailout or TARP was not a "forced lending program."

It was a "re-capitalization program," an "emergency government effort to keep banks from being forced to write down capital losses and risk insolvency."

Lending always slows down radically during recessions (See graph at News N Economics).

It seemed counter-intuitive that TARP bailout money in the US would not get banks lending again:

"TARP definitely has its problems, but it was developed to prevent a systemic crisis, and not to force lending. Were it not for TARP, more banks may have failed, and lending would be negligible, if not falling precipitously.

"The government should allow the bankers to make rational lending decisions, and right now focus its efforts on keeping the banking system afloat. And later, in the resolution phase of the banking crisis, the government should focus on the actual availability of credit and regulation (the flow of lending). (Source: News N Economics, This is a recession; bankers shouldn't be forced to lend, link)

The banks are using the bailout funds to recapitalize, strengthen their balance sheets, and avert failure.

In Thailand the banks haven't even been bailed out but similar arguments are being made:

The central bank has cut interest rates radically but commercial banks are not cutting their rates and lending more like they should (See article)

With global recession looming on the horizon reticence to loan by Thai banks could only be considered natural.

An old argument has been revisited: Bank lending dominates business financing in Thailand so the Stock Exchange of Thailand (SET) should be jump started to increase the importance of equity financing (See article).

When Thaksin faced reticence of banks to lend in the early 2000s he tried to get the stock market going but was only partly successful (Pasuk and Baker, 2004, Thaksin: The business of politics in Thailand, 109-115).  [To be covered in more detail in later post...]

Then the capital gains tax free sale of Shin Corp ignited the storm and everything else is history....