Stimulus Eludes Businesses, Homeowners
Wall Street Recovering, But Unemployment and Tight Credit Remain
Nov 13, 2009
The stimulus is generally considered to have saved the financial industry from collapse. Many banks—particularly Goldman Sachs, whose CEO recently said his company is ”doing God’s work”—are posting healthy profits. Even AIG, which received $180 billion in federal loans, is showing profits for the first time since 2007. The stock market has risen, spurred by federal incentives to consumers to buy homes and automobiles. Many experts expect further market recovery next year.
Unemployment Over 10 Percent
Despite hopes by President Barack Obama that the stimulus would cut the unemployment rate during this recession or at least slow its growth, the jobless rate reached 10.2 percent in October, the highest rate in 26 years.
Some economists criticized the fact that much of the latest $787 billion stimulus is scheduled to be spent in future years, possibly after the economy has recovered, rather than now when jobs are desperately needed.
Others noted that much of the stimulus money was given to state and local governments that used it to prevent layoffs of teachers and other employees rather than create new jobs. The White House has said 650,000 jobs were saved or created by the stimulus spending, but 3.3 million jobs have been lost since the stimulus was passed.
Many Democratic legislators, including Sen. Blanche Lincoln of Arkansas, say that after Congress finishes with health care reform, job creation should be the next priority. With elections coming up next year, some members of Congress have expressed the fear that high unemployment could cost them their majority In Congress. "Anytime unemployment hits double digits, it's hard to see the party in control having a good election year," Democratic pollster Peter Hart told The Wall Street Journal.
Little Relief From Loans
The government also hoped the stimulus would give some help to strapped homeowners and to small businesses caught in a credit crunch. But help from banks, which are still dealing with billions in bad loans, has been far from generous.
Actions against delinquent homeowners rose in the third quarter, which showed a record number of foreclosure filings over the previous year. Repossessions rose 20 percent between the third and fourth quarter. Nearly 1 million homes were affected by either foreclosure filings or repossession. The pace of loan modifications, as recommended by the federal government, remains slow.
As for business loans, banks used the Bush stimulus for acquisitions and additional purposes other than loans. Many big banks are still refusing to make small-business loans, and tight credit continues to be reported in most states. Without more funding, small businesses are unable to create jobs.
Banks are also raising fees for depositors and credit-card holders, further strapping families bowing under the weight of lower real estate prices, expensive credit and cuts in income.
SOURCES: New York Times, Wall Street Journal, The Hill, Business Week, USA Today, MSNBC.com
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