Banks purposfully not lending for other reasons?

[TheDoc9]

From an AOL news article -

On Monday, the Federal Reserve said it was doubling the total amount of cash loans to banks to $300 billion, and making $620 billion available to other central banks through currency swap arrangements, up from $290 billion. Those efforts, however, have done little to encourage lending. "There's so much liquidity in the system ? unfortunately, the liquidity is not opening up lenders at all," said Kim Rupert, managing director of global fixed income analysis at Action Economics. "It's the epitome of credit turmoil. There's too much fear in the market. Everybody is hoarding their cash, hoarding their reserves, not trading funds with each other."

Everybody in this case being the banks.

So they have the money to lend to stop the credit issues. But they don't because of so called fear. So let me understand this, a 700 billion bailout would have given them even more money and helped to quell their 'fear'.

I'm just a simple person and perhaps the markets are too complex for me to understand.

Thoughts..?

 

[BeauJangles]

It would be like a credit card company extending you a huge credit, knowing full well that you are on the brink of bankruptcy. The point of the bailout is to infuse banks with bad balance sheets with money so that they won't be on the brink of failure, then other banks will extend them loans.

 

[K1052]

A lack of confidence in a marketplace is every bit as dangerous as a lack of capital (and often has the same results).

 

[TheDoc9]

I can't agree guys, I think these are excuses. The liquidity is obviously there, but because the banks aren't getting what they want we have proof positive they are controlling the market. Whose to say they'll decide to allow more credit to flow even with the bailout. I haven't tried for a loan, but now apparently they're overcompensating and I've read that you need a 20% down payment and in return get a high interest rate when going for a home loan now.

If they were really concerned, why not simply limit loans to the more traditional 10% down payment and reasonable interest rate? What this says to me is we have to bribe our banks now to allow us certain luxuries such as owning a home.

 

[GTKeeper]

Originally posted by: TheDoc9
I can't agree guys, I think these are excuses. The liquidity is obviously there, but because the banks aren't getting what they want we have proof positive they are controlling the market. Whose to say they'll decide to allow more credit to flow even with the bailout. I haven't tried for a loan, but now apparently they're overcompensating and I've read that you need a 20% down payment and in return get a high interest rate when going for a home loan now.

If they were really concerned, why not simply limit loans to the more traditional 10% down payment and reasonable interest rate? What this says to me is we have to bribe our banks now to allow us certain luxuries such as owning a home.

10% down is not traditional. 20% is.... and since credit is so tight right now, its EXPENSIVE to borrow large amounts of money.

The day's of 4.5% rate 30 year loans are OVER.


Bank's are VERY risk averse now. This is happening as expected. They will ONLY lend to top prime candidates with a good credit score, and enough cash for a 20% down. Remember the housing market isn't done going down yet. A bank wants to get all that mortgage money back at some point.


One more thing. Banks are in the business of lending. Banks don't stop lending out of 'greed' they don't make any money that way! You know how a bank works don't you?

 

[TheDoc9]

I've never had a home loan just what I've read in these forums and 20% seemed to be at the higher end. Perhaps 10% isn't traditional and in such case we should all read credit crises headlines as sensationalism and fear mongering.

 

[K1052]

Originally posted by: TheDoc9
I've never had a home loan just what I've read in these forums and 20% seemed to be at the higher end. Perhaps 10% isn't traditional and in such case we should all read credit crises headlines as sensationalism and fear mongering.

There is commercial and interbank lending to consider too. That's the real credit crisis.

 

[LegendKiller]

Originally posted by: TheDoc9
I can't agree guys, I think these are excuses. The liquidity is obviously there, but because the banks aren't getting what they want we have proof positive they are controlling the market. Whose to say they'll decide to allow more credit to flow even with the bailout. I haven't tried for a loan, but now apparently they're overcompensating and I've read that you need a 20% down payment and in return get a high interest rate when going for a home loan now.

If they were really concerned, why not simply limit loans to the more traditional 10% down payment and reasonable interest rate? What this says to me is we have to bribe our banks now to allow us certain luxuries such as owning a home.

Ohhh gawd, you can't agree? What the fuck do you know about how banks work?

I love all of these internet banking experts.

The *CAPITAL* ratios of banks have declined significantly. If banks lend they *MUST* have additional capital to cover at least a portion of the lending. Many banks have a target Tier 1 capital ratio of 6.5%+. The liquidity being given is *DEBT*, not EQUITY (aka CAPITAL).

The whole purpose of the rescue plan is to infuse CAPITAL into the banking system after the capital has been depleated due to mark to market accounting.

Before you pretend to be an expert on banks, learn about how they work.

 

[dahunan]

Fake money anyhow.. we print more than we have

 

[43st]

I was watching the news at the car dealership this morning, as I was getting a state inspection.. I was amazed at the scare tactics the news anchors were using. Basically every 15 minutes some analyst would come on and say "well since congress didn't pass this, company's aren't going to be able to cut payroll checks this week. This will lead to huge unemployment.."

I mean.. come on. This is severe fact cherry picking with intent to spread fear. Hmmm... where have we seen that before.

 

[dmcowen674]

Originally posted by: LegendKiller
The whole purpose of the rescue plan is to infuse CAPITAL into the banking system after the capital has been depleated due to mark to market accounting.

Before you pretend to be an expert on banks, learn about how they work.

Depleated by criminal and nefarious means.

 

[nergee]

Every penny available is hoarded by banks trying to save their asses.
They can not make banks lend to each other who have far more debts
than whatever portion of that $700 billion, or the next and the next after
that is that they can get their hands on.....

 

[frostedflakes]

I asked this in another thread but don't think anybody addressed it (or maybe it had already been addressed earlier in the thread). What about suspending mark-to-market accounting? My understanding is that only a small amount of securities are bad, but due to this accounting rule, banks have to devalue all of them, even the good ones.

 

[LegendKiller]

Originally posted by: frostedflakes
I asked this in another thread but don't think anybody addressed it (or maybe it had already been addressed earlier in the thread). What about suspending mark-to-market accounting? My understanding is that only a small amount of securities are bad, but due to this accounting rule, banks have to devalue all of them, even the good ones.

The SEC are already looking into it. They are basically saying "fuck you" to congress and calling them worthless asses.

 

[LegendKiller]

Originally posted by: dmcowen674

Originally posted by: LegendKiller
The whole purpose of the rescue plan is to infuse CAPITAL into the banking system after the capital has been depleated due to mark to market accounting.

Before you pretend to be an expert on banks, learn about how they work.

Depleated by criminal and nefarious means.

Are you a broken record?

 

[frostedflakes]

Originally posted by: LegendKiller

Originally posted by: frostedflakes
I asked this in another thread but don't think anybody addressed it (or maybe it had already been addressed earlier in the thread). What about suspending mark-to-market accounting? My understanding is that only a small amount of securities are bad, but due to this accounting rule, banks have to devalue all of them, even the good ones.

The SEC are already looking into it. They are basically saying "fuck you" to congress and calling them worthless asses.

But would it work? If so, why don't we try this before buying $700 billion in assets?

 

[LegendKiller]

Originally posted by: frostedflakes

Originally posted by: LegendKiller

Originally posted by: frostedflakes
I asked this in another thread but don't think anybody addressed it (or maybe it had already been addressed earlier in the thread). What about suspending mark-to-market accounting? My understanding is that only a small amount of securities are bad, but due to this accounting rule, banks have to devalue all of them, even the good ones.

The SEC are already looking into it. They are basically saying "fuck you" to congress and calling them worthless asses.

But would it work? If so, why don't we try this before buying $700 billion in assets?

It needs to be a combination of things. FASB and the SEC are already moving. This provides a nice step in the right way. Not a removal of M2M, but a clarification that allows for illiquid markets and "non orderly transactions".

http://www.sec.gov/news/press/2008/2008-234.htm

 

[SP33Demon]

Originally posted by: frostedflakes

Originally posted by: LegendKiller

Originally posted by: frostedflakes
I asked this in another thread but don't think anybody addressed it (or maybe it had already been addressed earlier in the thread). What about suspending mark-to-market accounting? My understanding is that only a small amount of securities are bad, but due to this accounting rule, banks have to devalue all of them, even the good ones.

The SEC are already looking into it. They are basically saying "fuck you" to congress and calling them worthless asses.

But would it work? If so, why don't we try this before buying $700 billion in assets?

Simply because we are told that we need the money NOW. Bush says the sky will fall if it doesn't happen NOW. Financial investors are saying help us NOW, don't wait or we'll fall behind our European buddies! Silly pragmatist, don't you know the motto is to spend first and ask questions later? There is no need for rational thought, only fear.

 

[her209]

Libor Rises Most on Record After U.S. Congress Rejects Bailout
http://www.bloomberg.com/apps/...AVnE01UExIc&refer=news

 

[ThunderDawg]

OK, so the Treasury has already claimed to have authority for $300 $Billion to create money out of thin air. They want $700 Billion more, making that $1 $Trillion that the Fed Chairman controls, that they want to create the illusion of wealth. If residentail home prices fall another 5%, it will be another $Trillion or so. Give or Take. But hey, a $Trillion here, a $Trillion there, pretty soon you're talking about real money.

Dumbya, God bless him in his infinite stupidity, Failure and incompetence, is just trying to dig his entire presidency out of the Biggest SuckHole of the Twenty First Century.

 

[Craig234]

Originally posted by: TheDoc9
From an AOL news article -

On Monday, the Federal Reserve said it was doubling the total amount of cash loans to banks to $300 billion, and making $620 billion available to other central banks through currency swap arrangements, up from $290 billion. Those efforts, however, have done little to encourage lending. "There's so much liquidity in the system ? unfortunately, the liquidity is not opening up lenders at all," said Kim Rupert, managing director of global fixed income analysis at Action Economics. "It's the epitome of credit turmoil. There's too much fear in the market. Everybody is hoarding their cash, hoarding their reserves, not trading funds with each other."

Everybody in this case being the banks.

So they have the money to lend to stop the credit issues. But they don't because of so called fear. So let me understand this, a 700 billion bailout would have given them even more money and helped to quell their 'fear'.

I'm just a simple person and perhaps the markets are too complex for me to understand.

Thoughts..?

I'd be surprised if banks and Wall Streeet didn't try to put pressure on the government to pass their bailout, playing chicken with the economy.

It won't likely be as blatant as in other countries though, like when the wealthy in Venezuela put the country in economic disaster for months to try to force Chavez out.