The Banks Still Won’t Lend
The Fed believes people businesses will borrow if they keep rates low. They won’t. The banks won’t lend. The Administration’s Small Business Administration doesn’t lend. And the banks are hoarding their money because the regulators are encouraging them not to lend. From yesterday’s New York Times:
Last week, one entrepreneur had the opportunity to ask President Obama a question that no doubt has been on the mind of many others. The venue was a town hall meeting in Tampa, Fla., on Thursday, the day after the president’s State of the Union address. “I’m frustrated because I can create 500 jobs,” began Steve Gordon. “I’ve gone to the banks, I can’t get a loan. You lent directly to Wall Street, you lent directly to the automakers, you lent directly to the banks — why can’t the government make [small-business loans] available directly to us?”
The guy still doesn’t have his money. You can read the full article and hear our president burble on and on with his stupid answer. It’s all thoroughly depressing. Click here.
Meantime, the banks are borrowing huge amounts of money from the Fed at zero interest and lending it back to the Feds via Treasuries — making a huge spread. If you were cynical, or worse conspiratorial, you could conclude that it’s a really neat scheme for the government to make the banks rich and be able to pay large bonuses, some of which are then recycled into campaign contributions for the same politicians that came up with this brilliance.
Back at the farm, these low interest rates are screwing all of us with a few shekels in cash. What to do with it? You can earn a grand 1.65% to 2.0% if you give it to your local bank on a 12-month CD. Or you could gamble with it in the stock market. Of course, you could argue (cynically?) that the administration is trying to encourage us to gamble. If stock prices go up, then our politicians will look good and get re-elected. And even better, since the finance industry is now the largest single source of campaign contributions… Well you get the idea. N.Y. Senator Kirsten Gillibrand is spending oodles of time with hedge fund managers. Read this piece Senate Race in New York Is a Tug of War Over Donors.
ClusterStock: “Are banks tightening or loosening lending standards for business customers?
Well, it depends on who is asking.
If you’re a small business — supposedly the backbone of the economy — then the answer is tightening. In a recent Fed survey, not a single senior loan officer at a bank reported to loosening lending standards. A small percentage is still tightening for small borrowers, after all this time.
But if you’re big, then you’re in better shape. Not a single loan officer reported tightening standards, and a small percentage is loosening. It’s exactly the reverse.
The government is aware of this, and it’s why Obama wants to pump more money into small and community banks. We’ll see. Right now the trend is going in the exact wrong direction.”
