Giving money
Giving money - 
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Kai Ryssdal:
Government intervention is the new name of the game in the global economy. Even if free-market types do see it as a deal with the devil. Today the White House announced today that the Treasury Department's going to take stakes in American banks as much as $250 billion worth once all's said and done. You'll notice I said take stakes in banks not buy stakes. Because I don't think you can really call it buying if you force somebody to take your money. Even if you're doing it to get credit flowing again. And as to whether anybody can force a bank to lend money? Marketplace's Janet Babin reports from North Carolina Pubic Radio.

Janet Babin: Nine major banks are first on the government's money list. Wells Fargo is one of them -- a bank many consider solid. But so is Citigroup. Its balance sheet was a question mark just a few weeks ago.

Yet the Treasury Department called these nine banks healthy. The idea was that by giving them the money first, no one would worry that taking it meant you were close to failing.

Josh Rosner with Graham Fisher & Company, says he's still worrying.

Josh Rosner: We're calling institutions healthy that everyone sort of has questions about whether they fundamentally are.

Some banks had to be pressured into taking the money. The terms didn't help: bank executives have to agree to corporate governance standards and limits on executive pay.

Smaller banks are next in line. But they'll be vetted for solvency by stern federal regulators. The legislation prohibits regulators from using the cash to prop up insolvent institutions. Analyst Jaret Seiberg at the Stanford Group says some should and will be closed. He says the banks in the biggest trouble are small, and have lots of construction loans.

Jaret Seiberg: There probably is no way or economic justification to saving those institutions.

As Uncle Sam weeds out bank winners and losers and injects cash, the lending process should get some grease on its wheels. But not everyone thinks liquidity will stop banks from hoarding cash.

Josh Rosner at Graham Fisher, says even government intervention has its limits.

Rosner: They can tell them and force them to take the money, they can't tell them and force them to spend the money.

The cash infusion may not loosen credit markets entirely. But it's probably better than banking in Iceland, where the financial system is in a meltdown.

I'm Janet Babin for Marketplace.