lending

Banks trying to recoup from bad loans and inadequate reserves urged to lend

by Fran Smith on February 24, 2010

in Economy, Regulation

There’s a juxtaposition in a Washington Post article today that deserves a “Wha?” The article focuses on the huge drop in bank lending in 2009 – 7.5 percent or $587 billion – a plunge that hasn’t been seen in more than a half century.  Sheila Bair, chairman of the Federal Deposit Insurance Corporation, is quoted:

“But Bair said that the vast majority of the lending decline was the result of cutbacks by the nation’s largest banks, which have tightened qualification standards for borrowers and increased the proportion of money that they hold in reserve against unexpected losses.

‘Large banks do need to do a better job of stepping up to the plate here,’ Bair said.”

Didn’t indiscriminate lending and inadequate provision for loan losses contribute to the financial meltdown?  In this uncertain climate, isn’t it a good idea for banks to tighten their lending standards and increase their reserves? But, no, stimulating the economy is the game du jour.

Should the U.S. Government Nationalize “Broken” Banks?

by Richard Morrison on February 3, 2009 · 1 comment

in Bailout Watch, Economy

Such is the title of the latest BusinessWeek.com debate. Taking the “con” side is CEI’s own Eli Lehrer, who argues (in part):

Long-term government bank ownership, in any case, would simply make the country poorer. Banks actually create money when they lend it out, but doing so only has positive overall economic consequences when the loans get repaid. Government-owned banks would face enormous, understandable pressure to lend to politically powerful groups and industries that can’t reasonably repay their loans. Even the best managers couldn’t overcome this pressure.

Even in the “post-partisan” paradise of the Obama Era, public choice still matters!

*Photo credit: Declan McCullagh.

CEI Partners with NTU to Launch BeyondBailouts.org

by Cord Blomquist on October 22, 2008 · 3 comments

in Bailout Watch

Did the free market cause the financial crisis?  Was it unbridled capitalism?

The Competitive Enterprise Institute and the National Taxpayers Union don’t believe for a minute that capitalism caused the financial crisis.  How can we be so confident?  Because capitalism doesn’t exist in the United States, especially in the financial sector.

Nearly every industry in the U.S. finds itself making regular pilgrimages to Washington to seek special favors—subsidies for this or that, regulations that harm competitors or smaller firms, or trade deals that benefit their industry while hurting the American consumer.  No, America doesn’t have a capitalist system, we have a system of special favors, handouts, and perversion of the free market.

That’s why we’ve launched BeyondBailouts.org.  The financial system should be a free market one, not one controlled by the government, because government control and influence over the financial system is to blame for much of the current crisis.

Freddie Mac and Fannie Mae bought up bad loans, pushing the industry to make more of them.  The Fed played fast and loose with monetary policy by making money so cheap that financiers used it recklessly.  Our tax policies and myriad Federal programs are geared toward pushing people into homes they can’t afford.  Many of these policies were put into place by corrupt politicians bankrolled by those who sought to make a fast buck while distorting the free market.

Tell Congress enough is enough.  Write your Member of Congress and sign our petition at BeyondBailouts.org.