Geithner: Not more bank lending, but more bank lending “than would have been possible without government support”

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In his big speech Tuesday, and while answering questions from members of the Senate Banking Committee afterwards, Treasury Secretary Tim Geithner used extreme care when he talked about goosing the amount of lending done by banks. Here’s the phrasing from his speech, which he repeated almost verbatim later in the day:

The capital will come with conditions to help ensure that every dollar of assistance is used to generate a level of lending greater than what would have been possible in the absence of government support.

In other words: We’re not saying banks are going to lend more. Just that they’re going to lend more than they would without government aid. This is such a crucial point, and while I don’t know that Geithner will succeed in drumming it into the thickish heads of Congress and the media, I’m glad to see that he’s trying. We Americans were doing way too much borrowing before this financial crisis hit. That’s why we’re in a crisis. So lending should decrease overall. The government’s goal here should be to enable this deleveraging to happen in as orderly and smooth a fashion as possible. But when it’s all over it should still be substantially  harder to get a mortgage or a car loan than it was in 2006.