Potential borrowers are not credit worthy

Bailout Monitor Sees Lack of a Coherent Plan

Excerpts:

“You can’t just say, ‘Credit isn’t moving through the system,’ ” she said in her first public comments since being named to the panel. “You have to ask why.”

If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, “pouring money into banks isn’t going to fix that problem,” she said.

...

In her view, the government should be trying to create more reliable customers for those banks by shoring up the fragile finances of the millions of American families that could not save, borrow or spend even if their banks were flush with capital.

“Any effective policy has to start with the households,” she said. “Years of flat wages, low savings and high debt have left America’s households extremely vulnerable.”

Comment: Heard: GMAC will not make a car loan to anyone with less than a 700 FICO score. GMAC limits loans to buyers with 700+ FICO rating. We need a long term national program to encourage savings and investing. See: In 2005, the U.S. savings rate hit negative levels for the first time since the Great Depression. (article has graph)