Archive for the ‘banking’ Category

Bank Lending Will Improve— Slowly

February 22, 2010

Says Chamber of Commerce Economist at Dealer Expo

INDIANAPOLIS — If you’re looking for working capital for your small business, don’t count on getting it from your local banker any time soon, says a leading economist. Martin Regalia, chief economist for the U.S. Chamber of Commerce, told a gathering of business executives at the Dealer Expo here it will take about six months for banks to return to “normal lending practices.”

Martin Regalia

Speaking at the annual meeting of the Motorcycle Industry Council (MIC), Regalia said that it will take time for banks to define the risks— financial and regulatory— before they feel comfortable lending again.

“The biggest factor in getting banks lending again is time,” said Regalia. “Banks are in it to make money like everybody else, and contrary to what the president says, you cannot run a free enterprise system without risk.

“Risk is what we all take. It’s what we all manage, and it’s why we make the money we do. Without risk, there is no return—nobody pays you for certainty. So, banks are in it to manage risk. As time goes on a little bit, they will get a better feel for that risk, and they will begin to lend, and they will probably, at some point down the road, overshoot again and under price and over lend to the risk. But that takes time.”

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Obama Can’t Have It Both Ways

December 17, 2009

Free Market Should Dictate Lending Practices

President Barack Obama seems to be uncertain about how he wants to deal with U.S. bankers—sending them directly conflicting messages about their lending practices—and his inconsistency is causing a continuing problem for consumers and small businesses who can’t get the credit they need, especially those in the powersports industry.

On the one hand, he beats up bankers for making so many bad mortgages and creating such a mess that we taxpayers had to bail them out. Shame on you, you greedy bankers, he says, for making so many lousy variable rate mortgages to people who couldn’t make their payments when the new rates kicked in.

That seems like a reasonable position. I think there were a lot of lenders and Wall Street pros who got caught up in spinning mortgage paper, quickly shifting loan packages off their desk and on to the next greedy investor before he could look at the underlying poorly structured loan. While Wall Street bankers bear the brunt of the blame for packaging these loans, the real blame has to come back to the originator— the local banker who approved the so-called NINJA loans for people with no income, no job and no assets. Main street bankers were far from innocent in the entire sub-prime housing mess.

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