From an article by By Tami Luhby, CNNMoney.com senior writer
Bailout: Will it work?
Experts differ on whether the $700 billion bailout plan will prompt banks to lend and help the economy. But even if it does, it will take time.
NEW YORK (CNNMoney.com) — The $700 billion bailout plan signed into law Friday may get banks to start lending to each other again. But it remains to be seen how long that will take to jumpstart an ailing economy.
The goal is to unfreeze the credit markets. Financial institutions have become paralyzed with fear and though they have plenty of cash on hand, they’ve been hoarding it. Without this intra-bank lending, businesses are having trouble getting the financing they need even for daily operations, much less loans for longer-term projects.
“Hopefully, this will lend a calming effect to the markets,” said Joe Belew, president of the Consumer Bankers Association. “We need to take a deep breath, relax and start doing business again.”
Don’t expect lending to ramp up overnight, however. It may take weeks for confidence to return, experts said. Or even longer.
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Scary times, folks. Scary times.
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