Finally banks said: We can't find enough GOOD places to invest all the money printed!
- Thread starter crgarcia
- Start date
And the Adminstration wants to FORCE more lending.... wouldn't that be to poorly qualified borrowers... likely to default? Isn't how we got into this mess to begin with?
The banks are not lending because the "qualified" generally don't NEED to borrow nor WANT to borrow right now. The ones who WANT AND NEED to borrow are the same ones who are always like that... happy to get money NOW from wherever they can get it.... will worry about paying it back some other time... or NOT!
I'm inclined to agree. I posted this somewhere else, but was on the phone with my BoA mortgage guy (I'm buying property) and asked him if the media was accurate and banks weren't lending. He had a good laugh and said that of course they were lending. They just were lending to people who were qualified.
Well, when you want to put a political spin on it...
Yes, all the banks says that "qualified" applications will get a loan. But that's not the real issue - which is that they have tightened the lending standards. So then the question remains: How tight should lending standards be? 100% for a home should never be allowed in my opinion.
But the consequences for housing is one thing, we just need to wait that out, but for otherwise sound businesses this is a huge problem. Sometimes businesses have a legitimate need for short-term financing. But risk averse banks are now refusing loans which during "normal" business conditions would be approved. This is the real problem, and definitely something that the politicians need to face and "solve".
Ultimately, this can only be done by having the banks face the music and take the losses (wipe out the shareholders completely) - getting rid of all the crap and adding new equity which can be borrowed to the GOOD places/ideas etc... In a situation such as this, when commercial banking has gone bankrupt, it's only public money that can be used. So let the public (tax payer) reap the rewards by getting their fair share - ownership in the banks with a 5 year restriction to sell.
Yes, all the banks says that "qualified" applications will get a loan. But that's not the real issue - which is that they have tightened the lending standards. So then the question remains: How tight should lending standards be? 100% for a home should never be allowed in my opinion.
But the consequences for housing is one thing, we just need to wait that out, but for otherwise sound businesses this is a huge problem. Sometimes businesses have a legitimate need for short-term financing. But risk averse banks are now refusing loans which during "normal" business conditions would be approved. This is the real problem, and definitely something that the politicians need to face and "solve".
Ultimately, this can only be done by having the banks face the music and take the losses (wipe out the shareholders completely) - getting rid of all the crap and adding new equity which can be borrowed to the GOOD places/ideas etc... In a situation such as this, when commercial banking has gone bankrupt, it's only public money that can be used. So let the public (tax payer) reap the rewards by getting their fair share - ownership in the banks with a 5 year restriction to sell.
I had dinner with the director of a regional privately held bank this weekend and was told that they are being pressured on the one hand by the Fed or its reps to meet their obligations under the CRA but on the oher hand getting scrutiny from the FDIC for any risky loans. They have choosen the conservative path to so as not to run afoul of the FDIC and are making very few loans for lack of highly qualified applicants. They have always been very conservative and despite that their defaults are running 3x their historical mean at 7% (this a bank that has been around 35 years).
By they I assume you are referring to those in Washington who pushed banks to take on way too much risk in the 1st place, it appears that they are still at it despite the current debacle, though I doubt it is ouit of greed as much a fear right now. FDIC has traditionally been one of the weaker agencies as there were many ways to fend them off, but currently their star seems to have risen and they are who the banks are paying attention to which means no more marginal loans despite the pressure to lend.