Treasury, Banks Start to Retreat from Battle; Refusal to CIT Helps Lead Way

Byline: Patrice Hill, THE WASHINGTON TIMES

Washington's political leaders and the nation's big banks seem to have come to an uneasy truce after months of open warfare.

Top banks are returning the money Treasury gave them and mostly boycotting the department's lending revival programs in return for less meddling from Congress and the administration.

But analysts say the consequence of allowing banks to follow their natural urge to hunker down during a recession is that credit for consumers and businesses continues to shrink. Meanwhile, banks sweep their bad loan problems under the rug and nurture profits by, among other things, investing heavily in Treasury bonds.

The shift in Washington's stance was illustrated dramatically by Treasury's refusal last week to rescue CIT group Inc., a top lender to small businesses with shaky credit. After prodding banks for months to step up lending to small …

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Publication information: Article title: Treasury, Banks Start to Retreat from Battle; Refusal to CIT Helps Lead Way. Contributors: Not available. Newspaper title: The Washington Times (Washington, DC). Publication date: July 20, 2009. Page number: A01. © 2009 The Washington Times LLC. COPYRIGHT 2009 Gale Group.

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