Bailouts without monitoring sucks!

TODAY'S NEWSPAPER Washington Post, washingtonpost.com


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Lending By Bailout Recipients Falls Again
Lending by the nation's largest banks fell 6 percent in February from the previous month, continuing a downward trend that began in October with the financial crisis, according to data published yesterday by the Treasury Department.
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By Binyamin Appelbaum


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canadizzy wrote:
As expected, the banks response to bailouts is to lend less and ask for more bailout money. A bank has no vested interest in making loans in a shaky economic atmosphere. Banks are not normally risk takers; those that were got burned recently. Bailout money filled the coffers of the banks without risk. Why should they loan money if they have bailout money to balance their books. It's the policy of banks that need to be changed, not their capital reserves.

There are banks which have taken chances recently. One very clever banker loaned money to Amish and Mennonite farmers in the Pennsylvania area, where folks are so conscientious about borrowing money that they rarely do. When they do, they have moral reasons to repay in full, on time, and, if possible, early. That bank has been doing really well despite the lack of papers which ordinarily make banks loan their money. The hard working, generally self-sufficient, farmers of the area have no loan history and hence, on paper, are not good candidates for loans. What they do have is the correct attitude toward borrowed money and the bank that took the risks with them has been rewarded handsomely. That bank needed no bailout. Like Ford, they stated up front that they do not need bailout money. Their risk taking is logical and remunerative. Bailouts, without strict monitoring, have favoured the hoarders and not rewarded the logical risk takers.

Thanks for listening.
4/16/2009 5:23:39 AM