T/F : banks just aren't lending interest, provide, records, someone, support

Micholien

I constantly hear that even though interest rates may be at records lows, banks just aren't lending. How true is this? Can someone provide some data to support?

NakedPuts00

I work for a top 50 US commercial bank by assets. Commercial loans finally have ticked up this year, but not much. It is more of an issue of qualified customers wanting loans. We are a conservative bank (largest bank to not take TARP funds) and our lending standards are more or less the same as before the crisis. The problem is quality customers who survived the crisis have no need for new debt right. The have cash and unused facilities and sales have only started to increase again. No need for new term loans. Banks are not withholding credit from customers, customers don't need credit.

bigredhockey55

The borrower's catch 22 - when you need to borrow money no one will lend it to you. People only want to lend to those who do not need it.

anshultongia

Banks are scared to loan because of the way loan assets are "risk-adjusted" when they're on the balance sheet. Given Bernanke's promise to keep short rates low, banks essentially are sure they will get the funding for very cheap at close to zero. Now if you're a banker, you can do the following

1) loan it out to a decent guy who needs a mortgage at 5% for 30 years, but can only leverage 8x

or

2) Buy a crap load of 10~30 yr Fannie/Freddie/Other agencies at 3%, but can leverage up to 20x

Most banks chose to base the majority of their earnings assets on choice number 2, so consumers got screwed.

chunty

Just talked to a small cap manager who said all the banks they talk to are willing to lend, but most of their longtime customers don't want to borrow at this point. Who knows how true that actually is (I tend to side more with kevin0118 in that banks would rather buy agencies), but that is what the smaller banks are saying.

AndyNZ

There should be a special program that offers 45 year mortgages for foreclosure properties & REO's.

CFA4Techie

mp3bu Wrote:
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> There should be a special program that offers 45
> year mortgages for foreclosure properties & REO's.


Fannie and Freddie REO's have special financing available (not 45 years though)

John10

Banks are willing to lend, but are still sketch (and rightly so) about lending to borrowers without the proper credit qualifications. Very credit worthy borrowers are averse to increasing leverage until they have more visibility (real or perceived) into the economy's future.

Given what we've gone through over the past few years, I tend to think it is probably a good thing.

mp3bu

Dwight Wrote:
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> The borrower's catch 22 - when you need to borrow
> money no one will lend it to you. People only
> want to lend to those who do not need it.


Sad bad true. On a personal note, I did take out a car loan last year.

NO EXCUSES