In his testimony to the Congressional oversight panel last month, US Treasury secretary Tim Geithner noted that credit conditions had improved in recent weeks and months, with the Libor-OIS spread coming down to about 90 basis points from its October 2008 peak of 365 and corporate bond issuance and issuance of asset-backed securities both rising strongly in the first quarter.
However, he also highlighted reports on bank lending that showed big declines in consumer loans, including credit card loans, as well as commercial and industrial loans. The clear implication is that the banks, having been bailed out by the taxpayer, are not doing their bit to help recovery.
Geithner’s remarks and those from bank chief executives reporting healthy first-quarter profits hint at rising tensions between policymakers and managements of financial institutions.
Goldman Sachs appeared to jump the gun on the Treasury’s stress tests – the results of which...
