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"In 2009, 45 Percent of Banks with Assets Under $1 Billion Increased Their Business Lending"
Thomas M. Hoenig - president of the Federal Reserve Bank of Kansas City and the current longest-serving regional Fed chief - said in a speech at a U.S. Chamber of Commerce summit in Washington:
During
the recent financial crisis, losses quickly depleted the capital of
these large, over-leveraged companies. As expected, these firms were
rescued using government funds from the Troubled Asset Relief Program
(TARP). The result was an immediate reduction in lending to Main
Street, as the financial institutions tried to rebuild their capital.
Although these institutions have raised substantial amounts of new
capital, much of it has been used to repay the TARP funds instead of
supporting new lending.
On the other hand, Hoenig pointed out:
In 2009, 45 percent of banks with assets under $1 billion increased their business lending.
45% is about 45% more than the amount of increased lending by the too big to fails.
This confirms my previous argument that the small banks will lend, if we stop the too big to fails from growing even bigger and stifling all competition:
Do we need to keep the TBTFs to make sure that loans are made?
Nope.
Fortune pointed out
in February that smaller banks are stepping in to fill the lending void
left by the giant banks' current hesitancy to make loans. Indeed, the
article points out that the only reason that smaller banks haven't been
able to expand and thrive is that the too-big-to-fails have decreased
competition:Growth for the nation's smaller banks
represents a reversal of trends from the last twenty years, when the
biggest banks got much bigger and many of the smallest players were
gobbled up or driven under...
As big banks struggle to find a
way forward and rising loan losses threaten to punish poorly run banks
of all sizes, smaller but well capitalized institutions have a
long-awaited chance to expand.BusinessWeek noted in January:
As big banks struggle, community banks are stepping in to offer loans and lines of credit to small business owners...
At
a congressional hearing on small business and the economic recovery
earlier this month, economist Paul Merski, of the Independent Community
Bankers of America, a Washington (D.C.) trade group, told lawmakers
that community banks make 20% of all small-business loans, even though
they represent only about 12% of all bank assets. Furthermore, he said
that about 50% of all small-business loans under $100,000 are made by
community banks...Indeed, for the past two years,
small-business lending among community banks has grown at a faster rate
than from larger institutions, according to Aite Group, a Boston
banking consultancy. "Community banks are quickly taking on more market
share not only from the top five banks but from some of the regional
banks," says Christine Barry, Aite's research director. "They are
focusing more attention on small businesses than before. They are
seeing revenue opportunities and deploying the right solutions in place
to serve these customers."And Fed Governor Daniel K. Tarullo said in June:
The
importance of traditional financial intermediation services, and hence
of the smaller banks that typically specialize in providing those
services, tends to increase during times of financial stress. Indeed,
the crisis has highlighted the important continuing role of community
banks...For example, while the number of credit unions has
declined by 42 percent since 1989, credit union deposits have more than
quadrupled, and credit unions have increased their share of national
deposits from 4.7 percent to 8.5 percent. In addition, some credit
unions have shifted from the traditional membership based on a common
interest to membership that encompasses anyone who lives or works
within one or more local banking markets. In the last few years, some
credit unions have also moved beyond their traditional focus on
consumer services to provide services to small businesses, increasing
the extent to which they compete with community banks.Indeed, some very smart people say that the big banks aren't really focusing as much on the lending business as smaller banks.
Specifically
since Glass-Steagall was repealed in 1999, the giant banks have made
much of their money in trading assets, securities, derivatives and
other speculative bets, the banks' own paper and securities, and in
other money-making activities which have nothing to do with traditional
depository functions.
Now that the economy has crashed, the big banks are making very few loans to consumers or small businesses because they still
have trillions in bad derivatives gambling debts to pay off, and so
they are only loaning to the biggest players and those who don't really
need credit in the first place. See this and this.
So we don't really need these giant gamblers. We don't really need JP Morgan, Citi, Bank of America, Goldman Sachs or Morgan Stanley. What we need are dedicated lenders.
The Fortune article discussed above points out that the banking giants are not necessarily more efficient than smaller banks:
The
largest banks often don't show the greatest efficiency. This now seems
unsurprising given the deep problems that the biggest institutions have
faced over the past year.
"They actually experience
diseconomies of scale," Narter wrote of the biggest banks. "There are
so many large autonomous divisions of the bank that the complexity of
connecting them overwhelms the advantage of size."And Governor Tarullo points out some of the benefits of small community banks over the giant banks:
Many
community banks have thrived, in large part because their local
presence and personal interactions give them an advantage in meeting
the financial needs of many households, small businesses, and
agricultural firms. Their business model is based on an important
economic explanation of the role of financial intermediaries--to
develop and apply expertise that allows a lender to make better
judgments about the creditworthiness of potential borrowers than could
be made by a potential lender with less information about the borrowers.A small, but growing, body of research suggests that the financial
services provided by large banks are less-than-perfect substitutes for
those provided by community banks.It is simply not true
that we need the mega-banks. In fact, as many top economists and
financial analysts have said, the "too big to fails" are actually
stifling competition from smaller lenders and credit unions, and
dragging the entire economy down into a black hole.
Hoenig
also pointed out in numerous other ways that the too big to fails have
to shrink or financial crises will keep on happening.
So what are our political "leaders" doing?
As shown by well-known economist Simon Johnson, worse than nothing:
The
indications are that some version of the Dodd bill will be presented to
Democrats and Republicans alike as a fait accompli - this is what we
are going to do, so are you with us or against us in the final recorded
vote?
***
Of course, officials are lining up to solemnly confirm that "too big to fail" will be history once the Dodd bill passes.
But this is simply incorrect.
***
Why
exactly do you think big banks, such as JP Morgan Chase and Goldman
Sachs, have been so outspoken in support of a "resolution authority"? They know it would allow them to continue not just at their current size - but actually to get bigger. Nothing
could be better for them than this kind of regulatory smokescreen. This
is exactly the kind of game that they have played well over the past 20
years - in fact, it's from the same playbook that brought them great
power and us great danger in the run-up to 2008.
When a major
bank fails, in the years after the Dodd bill passes, we will face the
exact same potential chaos as after the collapse of Lehman. And we know
what our policy elite will do in such a situation - because Messrs.
Paulson, Geithner, Bernanke, and Summers swear up and down there was no
alternative, and people like them will always be in power. If you must
choose between collapse and rescue, US policymakers will choose rescue
every time - and probably they feel compelled again to concede most
generous terms "to limit the ultimate cost to the taxpayer" (or words
to that effect).
The banks know all this and will act accordingly. You do the math.
Once
you understand that the resolution authority is an illusion, you begin
to understand that the Dodd legislation would achieve nothing on the
systemic risk and too big to fail front.
On reflection, perhaps
this is exactly why the sponsors of this bill are afraid to have any
kind of open and serious debate. The emperor simply has no clothes.
Indeed, Johnson has previously said that recovery will fail unless we break the financial oligarchy that is blocking essential reform, and he has called the U.S. a banana republic.
High-level Fed officials - including Hoenig - agree.
Congress and the White House won't do anything to stand up to the oligarchs because they are fully bought and paid for . The oligarchy is trying to make us serfs, and our politicians (with a few notable exceptions) are helping.
Remember, it is the government which created the too big to fails. Now, politicians are covering for them with legislation that sounds good ... but really just helps the too big to fails get even bigger.
Unless the people confront the oligarchs directly (plus stop feeding the tapeworm), the nation will be lost.
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If everyone will just take their deposits out of the TBTFs they will go away...
"In 2009, 45 percent of banks with assets under $1 billion increased their business lending."
That's got to be total bullshit.
Does not that mean 55% decreased their lending?
I, not they... I have seen banks who had strong fundementals to begin with not only weather the Swan "Poo-pie" very well but where in fact able to raise private funds to go long... bought on the way down (or funded on the way down) and still are... for subject properties that meet thier internal requirements... Good Location... Bla, bla... BLA!
As for extending credit... sure... if the person / people are worth a shit... and if said person(s) are smart enough to figure out who is able to perform...
But back to you 45% lending verse 55% not lending a penny... Yes! 55% are dead in the water for local Banks and they are not lending... someone will now ask for the national averages in pie graph format that is certified by "Big Ben"... dont bother.. call your local banks... where you are... and do the math your self doubters... in plain english get off your ass and figure this shit out for yourself.
The last part was more for the ignorant in the crowd than you, "hedgeless_horseman"...
Be well, JW
Maybe or maybe stayed the same, but that compares to approx. 0% of the too big to fails.
THE END IS NEAR AND EVERYONE KNOWS IT
The only people that think things are "smooth" are the goons in Washington.
A historical event is soon going to occur (no, not Obamacare) and it will hit hard ON EVERY AMERICAN.
If you haven't started prepping, I would advise you at least buy a few extra items from the store everytime you go out!
We cannot have a functional free republic with such a large percentage of the population being entitled, spoiled, ignorant, lazy and brain-damaged from years of liberal-socialist claptrap. There's nothing like cold hard reality to snap the zombies out of it. This country needs and is going to get a complete and total system collapse and the depression of all depressions. Sadly, men seem incapable of learning from the tragic mistakes of prior generations and must go through the painful cycle of destruction-rebirth once more.
WE have a lot of work to do going forward! Don't give up!
You Evangelicals are such fucking Morons... and God hates ignorance more than anything else I am sure...
So... heres what you do... Name and Source "10 Major Differences" between Bush and Obama... you know Bush did this but Obama does that type shit... and you can skip abortion completely...
When you have figured out that you can NOT! name 10 major differences between Bush and Obama... do yourself a favor and add Clinton in.. for shits and giggles...
Or... you can go back to praying for the end... and ignoring the facts...
Evangelicals? ME? I am an atheist!!!
You say I am "ignoring the facts"? That is exactly the opposite of what I am doing. Where in History can you point to that says that the fiscal trap we are in ends well?
Answer: NEVER!
The monetary system is gonna collapse by choking on massive debt. It is gonna be the biggest Deflationary Depression the world has ever seen!