Banks have decided that they are better off holding their money, its risky in the hands of the average Joe. He may lose his job, like many have, or he may not be able to pay those huge mortgage payments on his house that is down 50% in value.
It’s not like this psychology is new, this is a repeat of every downturn that I can remember. The banks turn off the spigot when they smell risk. It’s easier to make a few bucks safely than to put it on the street for a better return and lose the money.
Their are some private lenders of last resort out there, but the new practice is to ask borrowers for money before they can evaluate you for a loan. That’s rich, you need money so the first thing they want you to do is pay them so that they can figure out if you are worthy enough to receive their loan.
The downward spiral kicks in when consumers who need loans to continue their business operation fail or commercial building owners cannot re-finance. Banks want no part of buildings with high vacancy rates, so if you lost a real estate agent, a title company tenant and maybe an exercise business and can’t fill the space, you had better have holding power (deep pockets), because the bank is keeping their money.
So all that talk about getting more money on the street via the banks has turned out to be a joke. If you give someone a million dollars and tell them to be generous with it, to make some loans and stimulate the economy, and all they did was send you bank statements that showed higher balances, you would probably be upset, right? Well that is exactly what has happened with the banks, they took public money and hoarded it. Many poorly managed their customer’s money when they had it, now they have become Scrooge with the bail-out funds.
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Good article, I agree with you. The banks received quite a bit of bailout money to help the common person but the banks won’t loan the money to us. What a joke. We have no money and ask them to do what the government wants them to do with it, like loan it to us, and then we’re refused because we don’t have money. I’d laugh if I wasn’t so astounded and saddened by it.
I’ve heard that homeowners who get their financing from a mortgage broker as opposed to a bank may very well have to deal with a “one strike and you’re out” situation.
At least traditionally, some banks would try to work with you in tough times, although that too may be a thing of the past.
Great article. You we’re right about everything you said. Who do you think is to blame. Do you everything should be blamed on the bank?
No, it wasn’t just the banks. It’s funny because I have some of the old Fannie Mae newsletters that talk about how Congress was putting pressure on them to make loans easier to get for those less qualified individuals. It’s easy to be a Congressional Representative, you just blame everyone else when things go wrong. How could you be responsible, you only have 1 vote? Congress is already head hunting for a scape goat, they want to blame it on someone, thus the focus on Countrywide. It was a private company that basically found a way to fund individuals who Congress wanted to see getting money. Let’s face it, it was a really big party, now no one wants to pay the gigantic bill.
I think this is one flaw on the law. I think the government should at least pass a bill preventing this from happening. In the end the banks had all the money and lots of business are going down again.
Congress huh? How I wish some of them can be tried some time. It becomes their job now, blaming someone else for something just like that.
Private lenders will always try and gauge people.
well i guess its the time not to deposit our money in the bank due to whats going on right now! (if this will happen for sure the banking industry will be down)
I agree with admins point of view. Is nationalization of institutions like banks is one of the solutions ? In such a case government which is unbiased will have complete say on how the money should be distributed for the good of the society.