By paying less dividends and not buying in their stock, companies are conserving cash in a way they had not done in recent years. That is because banks are not making loans. Furthermore, industry is afraid of higher taxes to come. Corporations have to sell stock or bonds whenever possible when they do raise cash. In the past, such funds were sourced from commercial banks.
It’s all hurting economically.
This is another indication of the failure of the Obama Administration to properly repair the banking system. In its attempt to clean up banking books, they have done two things:
1) They have made banks gun shy, afraid to make loans, and
2) They have made funds available to banks at practically no cost, so banks produce tremendous earnings merely investing in U.S. bonds instead of American industry.
This is especially true of the banks that “were too big to fail” and were bailed out. Many of the smaller banks cannot freely lend funds because of the tight rein put on them by their regulatory agencies.
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