Source: Back to Work: Why We Need Smart Government for a Strong Economy by Bill Clinton
Abstracted from pages 120, 121
First at, we have to get money flowing. Recessions created by financial crashes usually take longer to get over, five to ten years or more, than business-cycle recessions, because banks are reluctant to lend, businesses are reluctant to borrow, corporations are reluctant to hire, and consumers are reluctant to spend.
The good news is that we know where the money is in our distressed economy. And there’s lots of it. Banks have more than $2 trillion in cash reserves uncommitted to loans. And businesses of all sizes have about that much uncommitted to investment.
Since banks can lend, conservatively, $10 for every dollar they have in reserves, U.S. banks have the capacity, in theory, to end the entire global recession. Companies could invest their cash in new products that would increase hiring today or in research and development that would increase employment today and even more in the future.
Unfortunately, banks are reluctant to lend, and loan demand is weak. As for the big companies, many executives have decided, at least for now, not to invest in future growth but to buy back their stock instead, increasing earnings per share and, in the process, earning bigger bonuses for top management, once again widening the gap between themselves and their own employees and doing nothing to put American back to work.