Bailed-out Banks Reduced Lending, Gave Raises

Want another example of the unintended consequences of government policies? Here’s this revelation from a USA Today/American University study:

Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn’t get aid, a USA TODAY/American University review found.

Here’s a graphic from the USA Today story displaying the lending gap:

What’s particular disturbing about all of this is that one of the major intended purposes of the bailouts was to increase lending on the part of banks — however dubious that intention might have been. Leave it to a government program to result in the exact opposite of its intentions.