Confusion in Lending
Published by Bob Foster
I think it is safe to say that anytime the government gets involved in anything to do with business–confusion reigns supreme. The President made it clear in one of his recent addresses (review here) that he wanted banks to start lending, especially to small businesses.
However, yesterday, I read a column from the Associated Press that covered Congressional hearings on the conflict and confusion being experienced by banks. Here are some summarized excerpts from the article:
Regulators at a House hearing Wednesday heard complaints from small business owners, and others, who haven’t missed any payments, but are getting their credit lines deeply cut or yanked away… “There is actually a growing anger from these people,” said Rep Spencer Bachus of Alabama”… “The reduction or denial of credit to credit-worthy customers is occurring every day across America in about every town,” he said.
“The current bank regulatory climate is causing many community banks to unnecessarily restrict their lending activities,” said Michael Menzies, Chairman of the Independent Community Bankers or America. “Actions of bank field examiners are often unnecessarily putting constraints on community bank lending,” he said.
“Banks have to lend money to make money,” Timothy Long, senior deputy comptroller in the Office of the Comptroller of the Currency, told the hearing…Scott Polakoff, acting director of the Office of Thrift Supervision, said “…there is an element of truth in the bankers complaints [that examiners have been ordered to ‘crack down'].”
Bank examiners work for the Federal Deposit Insurance Corporation and the Treasury Department. Don’t tell me this is another boondoggle by Tim Geithner!
Will the political drama never end, so businesses can all get back to work and bring our economy back on track?
Comments
4 Responses to “Confusion in Lending”
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I think the government has to get involved at this point and nobody said it was going to be an easy – or quick recovery! It’s taken years to get us in this mess, it will take awhile to get us back on the right track. We’re still in triage mode at the moment – something has to be done to stop the hemorrhaging and that means a halt to everything until it can be strategically rectified.
I really don’t think anyone is in a position to nail the new guys to the cross yet. I just watched Geithner on Meet the Press and was impressed by his explanation of the plans in place.
Check out the link and read/watch the streaming media as well: http://www.msnbc.msn.com/id/29943746/
Jeff – Thanks for the comment…this subject needs all the discussion it can get. The main point I was trying to make is that, out of the 9,500 banks in the U.S., only a small percentage are in deep trouble. Many of the Community banks do not have any toxic assets, and never have had. Why then, do the bank examiners apply the same requirements to good banks, as they do to bad banks, and in the process shut down small business? Congress seems to want answers to the same question.
In Geithner’s discussion on Meet the Press, he said we don’t have time to wait, we must act now. He is probably right, but he is only talking about the largest banks with toxic assets. Congress is pushing to get Community banks lending again, but the Treasury dept.(Geithner’s dept.) is telling the regulators to “crack down” on Community banks. Why is that?
Regarding Tim Geithner himself…I think the jury is still out. He is obviously a smart guy, but we can’t forget that he was President/CEO of the Federal Reserve Bank of New York, from November 2003, until January 2009. What was he doing all this time that Wall Street was going crazy? Maybe we’ll find out in the days ahead.
Thanks again for the comment.
Bob Foster’s last blog post..Confusion in Lending
“Regarding Tim Geithner himself…I think the jury is still out. He is obviously a smart guy, but we can’t forget that he was President/CEO of the Federal Reserve Bank of New York, from November 2003, until January 2009. What was he doing all this time that Wall Street was going crazy? Maybe we’ll find out in the days ahead.”
Yep! This has been my point too.
Also as Arianna Huffington pointed out, the President while on Jay Leno admitted that the original TARP funds have not been successful in that the banks have not been lending, suggesting another securitized market of sorts that will lend to the community for student loans etc.
We have heard little about credit unions. I wonder why? I guess we only hear about those banks that have caused this crisis who require billions in bailouts instead of those banking institutions, including credit unions and community banks, that did not take such risks.
You would think that the lesser would become the greater in such times–apparently not.
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Judith – As I understand it, one of the reasons the TARP funds are not being used for lending by the banks is because the regulators, from Treasury agencies, are putting pressure on the banks to put the TARP money into capital rather than lend it out. In other words, the President is telling banks to loan money out, and Geithner’s bank regulators are telling them to put it into capital. Do we have a communications problem in Washington?
I recently saw someone on TV talking about credit unions and the fact that they were working along just fine. I am not sure, but I don’t think they come under all the same regulations as banks, plus they never make large toxic loans. Unfortunately, they also do very little business lending.
Thanks for the comment.
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