Are the banks really at fault for not loaning out money?

[Xellos2099]

Recently, I have heard a whole lot of people are piss off at banks for not making loans out to people while they got fed's aid and get record profit. Is it really bank's fault?

Trouble at the banks started when the bank made out too many loans and people were defaulting on the loan. They got Fed's aid and borrow money for I think at .05 or 1% interest rate. The economy has gotten worse and jobs are beginning to be more insecure; thus create an increase of risk when individual went to banks for loan. Obama himself has said that Bank need to be more responsible when they loan out money to individual yet at the same time, want banks to loan out money to business that can go belly up any seconds. Can you really blame the banks for not loaning out moneys to small business?

As for record profit recently, I have done some research and find out that a lot fo bank that borrow money from Fed for 0.5% to 1% in turn purchase tons of government bond which give I think 4-5% interest. It is raw 3-4% profit with like zero risk, at the very least much lower risk than loaning money out to peoples.

 

[spidey07]

Last article I read it's a lack of demand for loans. This administration has people and business so scared out of their minds of actually making money for the penalties they will receive they're stuck in the "wait and see" mode.

With a president so hell bent on destroying capitalism and production is anybody surprised?

 

[Hacp]

Recently, I have heard a whole lot of people are piss off at banks for not making loans out to people while they got fed's aid and get record profit. Is it really bank's fault?

Trouble at the banks started when the bank made out too many loans and people were defaulting on the loan. They got Fed's aid and borrow money for I think at .05 or 1% interest rate. The economy has gotten worse and jobs are beginning to be more insecure; thus create an increase of risk when individual went to banks for loan. Obama himself has said that Bank need to be more responsible when they loan out money to individual yet at the same time, want banks to loan out money to business that can go belly up any seconds. Can you really blame the banks for not loaning out moneys to small business?

As for record profit recently, I have done some research and find out that a lot fo bank that borrow money from Fed for 0.5% to 1% in turn purchase tons of government bond which give I think 4-5% interest. It is raw 3-4% profit with like zero risk, at the very least much lower risk than loaning money out to peoples.

No, people are mad at banks for paying out huge bonuses when they clearly still ow the FED money. Remember the 10 billion Goldman Sachs got from AIG? Thats AFTER the USG bailed AIG out. Goldman still hasn't returned that cash, yet they're paying 20 billion in bonuses.

That is why we're mad. We're not mad at banks for not lending, they can do whatever they want with their money, as long as its not taxpayer money.

 

[lothar]

No, people are mad at banks for paying out huge bonuses when they clearly still ow the FED money. Remember the 10 billion Goldman Sachs got from AIG? Thats AFTER the USG bailed AIG out. Goldman still hasn't returned that cash, yet they're paying 20 billion in bonuses.

That is why we're mad. We're not mad at banks for not lending, they can do whatever they want with their money, as long as its not taxpayer money.

Which bank still owes TARP money that's paying billions of dollars in bonuses?
It's certainly not BAC, C, JPM, WFC, GS, or MS.

Nonsense. GS doesn't need to return any cash regarding AIG. They took back money that AIG owed them from their bet. You can blame the NY Fed for forcing AIG to pay them at 100% instead of negotiating a discounted rate.

 

[soccerballtux]

If nobody is a). credit worthy or b). needs the loans for anything, then why would there be loans made? Making loans when there is not a reason for them is foolish, bad for the economy, and leads to inflation and misallocation of resources.

 

[woolfe9999]

Which bank still owes TARP money that's paying billions of dollars in bonuses?
It's certainly not BAC, C, JPM, WFC, GS, or MS.

Nonsense. GS doesn't need to return any cash regarding AIG. They took back money that AIG owed them from their bet. You can blame the NY Fed for forcing AIG to pay them at 100% instead of negotiating a discounted rate.

They wouldn't have gotten that money if the U.S. taxpayor had not bailed out AIG. AIG's impending collapse and inability to pay was a foreseeable consequence of the risks taken both by AIG AND the banks it insured. I agree with HACP on this one.

- wolf

 

[Xellos2099]

Mortgage insurance, single worst creation ever by banker.

 

[lothar]

They wouldn't have gotten that money if the U.S. taxpayor had not bailed out AIG. AIG's impending collapse and inability to pay was a foreseeable consequence of the risks taken both by AIG AND the banks it insured. I agree with HACP on this one.

- wolf

And?
Unless they legally declare bankruptcy and file for it, they're still obligated to pay any amount they owe to other firms, corporations, and creditors.

The risk involved bankruptcy and the bailout removed that.
Does GS owe taxpayer money? No. Does AIG owe? Sure.

If you're going to demand GS return payment then you should also demand that to all contractors and corporations that have collected money for services rendered to AIG since the bailout.

 

[lothar]

Also given the fact that AIG wanted to negotiate the payments to a discounted rate but the NY Fed said "100% is a must", the only people that owe that amount is between the NY Fed(for forcing them to overpay when they could have negotiated) and AIG(who stupidly acted on the NY Fed's recommendation).

 

[drebo]

And?
Unless they legally declare bankruptcy and file for it, they're still obligated to pay any amount they owe to other firms, corporations, and creditors.

The risk involved bankruptcy and the bailout removed that.
Does GS owe taxpayer money? No. Does AIG owe? Sure.

If you're going to demand GS return payment then you should also demand that to all contractors and corporations that have collected money for services rendered to AIG since the bailout.

Not if they file Chapter 7. Chapter 7 is gone, see-ya later, bye bye, never heard of again. Chapter 11 allows them to negotiate reduced debt with their creditors while restructuring their business. Chapter 7 does not. Not all businesses are eligable for Chapter 11.

I don't know the specific details about AIG, but to say that bankruptcy does not absolve a corporation of debt is false.

 

[PokerGuy]

Why should GS have to pay anything? They didn't get any bailout money, they just benefited from the fact that the fed chose to bail out AIG. GS doesn't owe anything and they can pay out whatever 'obscene' bonuses they want.

This misguided class war against the evil bankers and wall street is going accomplish nothing other than further hurting the economy.

 

[heyheybooboo]

Why should GS have to pay anything? They didn't get any bailout money, they just benefited from the fact that the fed chose to bail out AIG. GS doesn't owe anything and they can pay out whatever 'obscene' bonuses they want.

This misguided class war against the evil bankers and wall street is going accomplish nothing other than further hurting the economy.

So when Goldman leverages a single dollar 40-95 times they are doing it to benefit me?

So when Goldman 'shorts' their own bundled paper how does that benefit the overall financial markets?

And when Goldman conducts 'private' business through the Cayman Islands with their highly-leveraged dollars, and their huge financial 'weapons of mass destruction' go bad, how does that benefit their trading partners and the US economy?




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[PokerGuy]

So when Goldman leverages a single dollar 40-95 times they are doing it to benefit me?

So when Goldman 'shorts' their own bundled paper how does that benefit the overall financial markets?

And when Goldman conducts 'private' business through the Cayman Islands with their highly-leveraged dollars, and their huge financial 'weapons of mass destruction' go bad, how does that benefit their trading partners and the US economy?

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Silly class warrior. GS is not in business to benefit you, the financial markets, trading partners or the US economy. They are in business to make money, and they've done it well. If they ask for bailout money after some risky bet goes wrong, then come back with those questions. Until then, they have no relevance to the issue, any more than you deciding what to spend your $50 bucks on.

 

[Theb]

I realize it's all anecdotal but my sister and I both received home loans towards the end of last year. The documentation requirements were pretty outrageous, but the documents were attainable. I've been talking to the bank about a car loan and I'm dragging my feet because I can't decide what to get but the bank seems eager. I haven't heard anything since early 09, but at that time there was no issue with the Company's revolving credit line.

Is anyone here who's genuinely qualified had a hard time getting money?

 

[Slew Foot]

If youre qualified you can easily get money. Its the stupid idiot strawberry pickers making 30K a year who cant get get million dollar loans, and they complain that banks arent lending.

 

[GTKeeper]

Ok, a lot of mis-informed folks in this thread.

The banks aren't lending because they know more losses are coming. They need all the extra cash they can muster with the Alt-A and CRE meltdowns just around the corner.

Also, the more significant problem here is the amount of DEBT in our system. You can't lend more until the existing debt is serviced. Its akin to asking someone who has 30k in CC credit 25k in balances to 'get more loans'. Or for a CC company to 'loan more to the person with 25k in debt and 30k in credit'. I'm sorry, until that 25k is paid down there will be no more lending.

This recession is different from other ones is that because its due to a credit collapse and debt overload. Until we start cram-downs, debt to equity conversions etc. this will continue.

 

[GTKeeper]

If youre qualified you can easily get money. Its the stupid idiot strawberry pickers making 30K a year who cant get get million dollar loans, and they complain that banks arent lending.

I think Donald Trump was on CNN a month back or so saying 'i don't get it, banks made all these profits, but are not lending'. He can't get a loan and he's not exactly a strawberry picker.

 

[PricklyPete]

I imagine it is pretty hard getting money for small businesses...and maybe even large businesses are having trouble.

I do know that I had no problem whatsoever refinancing my home to get into a lower rate (just closed on Jan 25th) and I also had no problem financing a new car purchase two months earlier. Granted I'm a very low credit risk, but there was no hold ups whatsoever. The refinance process was no different than the process I went through buying the house 3 years earlier. So I'm not seeing banks being an issue from a consumer aspect...but I have no idea from a business aspect.

 

[highland145]

Is anyone here who's genuinely qualified had a hard time getting money?

My FICO is over 800. I owe $40k on a $280k house and have no other debt. So my yearly debt ratio is under 10%. I have a good relationship with several banks in town.

1. Tried to buy a rental for $30K that was tax appraised at $58k. Told no right off the bat by 3 banks. "It's not your primary or vacation home so it's risky real estate. You'll have to borrow off your heloc."

2. Just bought 10ac of raw land. Similar to #1. Worth about $60K and paid $27K. Only one would finance and then only 65% of the sale price.

Fortunately, I have other avenues if I need $$ but they're a little tight, imo.

 

[Theb]

I imagine it is pretty hard getting money for small businesses...and maybe even large businesses are having trouble.

I do know that I had no problem whatsoever refinancing my home to get into a lower rate (just closed on Jan 25th) and I also had no problem financing a new car purchase two months earlier. Granted I'm a very low credit risk, but there was no hold ups whatsoever. The refinance process was no different than the process I went through buying the house 3 years earlier. So I'm not seeing banks being an issue from a consumer aspect...but I have no idea from a business aspect.

I just realized I read your posts in Walter Sobchak's voice.

 

[brencat]

Silly class warrior. GS is not in business to benefit you, the financial markets, trading partners or the US economy. They are in business to make money, and they've done it well. If they ask for bailout money after some risky bet goes wrong, then come back with those questions. Until then, they have no relevance to the issue, any more than you deciding what to spend your $50 bucks on.

Perfectly said!

 

[brencat]

No, people are mad at banks for paying out huge bonuses when they clearly still ow the FED money. Remember the 10 billion Goldman Sachs got from AIG? Thats AFTER the USG bailed AIG out. Goldman still hasn't returned that cash, yet they're paying 20 billion in bonuses.

You are completely misinformed. Only Citi still owes the govt some money I think (along with Fannie, Freddie, and GM). Everyone else of the major bulge brackets has returned the bailout money following equity and preferred stock offerings they did over the summer and fall 2009.

That's why it was completely disingenous of Obama in the State of the Union and recent speeches to say he wants all of the money returned. He knows damn right well that nearly every financial institution repaid the loans but he's betting people like yourself aren't aware of this...and apparently he was right. But thankfully, the financial media and a growing number of independents and smart individuals are wising up to Obama's constant lying.

Finally, for those complaining that banks aren't lending but instead investing the cheap borrowed money into Treasuries...it was actually common practice before 1950 for banks to hold close to 15% of their assets in Treasuries (versus ~ 5% today), so you could say banks were more stable generally back then. The Fed also has an incentive for banks to invest in Treasuries which buoys demand and keeps interest rates low so that mortgages and other spread-based credit products stay attractive to potential borrowers.

Nevertheless, loan demand is down...plain and simple, and will remain so if we don't get a positive resolution soon on taxes, regulation, and recent conflicting language from this administration. They are hampering the recovery with their proposals and policies and doing everything wrong economically. Typical of the left -- good intentions, unintended negative consequences.

 

[heyheybooboo]

Silly class warrior. GS is not in business to benefit you, the financial markets, trading partners or the US economy. They are in business to make money, and they've done it well. If they ask for bailout money after some risky bet goes wrong, then come back with those questions. Until then, they have no relevance to the issue, any more than you deciding what to spend your $50 bucks on.

The ignorance is strong with this one

Perfectly said!

Ditto.


Goldman received $14 billion in TARP, a pass-through of $8 billion in TARP through AIG, and has an additional TARP exposure of $8-$10 billion.

Goldman leaped into synthetic collateralized debt obligations, which bundled derivative contracts rather than actual loans. They leveraged through the roof.

And they bet against their own AAA-rated securities that they had sold in previous years.

Goldman fared so well with their financial maneuvering and cash management [sarcasm] that when the Crash came to head in 2008, Goldman had to convert to a bank holding company to access capital from the Federal Reserve.

The would be in edition to the $5 billion in cash loaned to them by Warren Buffet (at 10% interest) to keep them afloat.

Warren Buffet, being the one who coined the term 'Financial Weapons of Mass Destruction' in reference to Goldman.

So.

Troll on, Troll Boys.





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[lothar]

Not if they file Chapter 7. Chapter 7 is gone, see-ya later, bye bye, never heard of again. Chapter 11 allows them to negotiate reduced debt with their creditors while restructuring their business. Chapter 7 does not. Not all businesses are eligable for Chapter 11.

I don't know the specific details about AIG, but to say that bankruptcy does not absolve a corporation of debt is false.

Umm...that was the entire premise of my post that you quoted.
You must be misinterpreting what I said.

 

[lothar]

Goldman received $14 billion in TARP, a pass-through of $8 billion in TARP through AIG, and has an additional TARP exposure of $8-$10 billion.

Goldman leaped into synthetic collateralized debt obligations, which bundled derivative contracts rather than actual loans. They leveraged through the roof.

And they bet against their own AAA-rated securities that they had sold in previous years.

Goldman fared so well with their financial maneuvering and cash management [sarcasm] that when the Crash came to head in 2008, Goldman had to convert to a bank holding company to access capital from the Federal Reserve.

The would be in edition to the $5 billion in cash loaned to them by Warren Buffet (at 10% interest) to keep them afloat.

Warren Buffet, being the one who coined the term 'Financial Weapons of Mass Destruction' in reference to Goldman.

The major banks were forced into TARP because the FED didn't want to expose the weakest bank(which was Citigroup) at the time.
http://www.pbs.org/wgbh/pages/frontline/breakingthebank/view/
Just so you know, the link above is from PBS, not FOX.

Lots of companies also stupidly applied for TARP when they clearly didn't need it because they thought it was the popular thing everybody on Wall St was doing and didn't realize that it had potential to be filled with poison.

As soon as the Obama admin started putting additional rules and limitations in place, they completely rushed to pay it off.

Warren Buffett himself invests in "financial weapons of mass destruction".
Let me guess, you're just parroting your mouth and haven't looked at the derivatives that Berkshire carries on their books? Granted, he may end up coming out on top like he always does but he may end up coming out at the bottom as well. It's still a derivative bet whether he comes out on top or at the bottom.
He recieved $5 billion in premiums up front for his bet. If his bet fails, he can owe any amount up to $36 billion(absolute maximum).