The lead bank was a bank we had been working with for years. They were in the loans we were refinancing. But even though they knew us and our business well, the due diligence process was excruciating.

It was as if they had put in place all kinds of new checks and hurdles to be sure the loan was secure. Their lending standards were much tougher.

Of course, it also occurred to us that their due diligence attorneys and accountants didn’t have much else going on, so they probably dragged out the process as long as they could to maximize their fees.

So anyway, money is available at reasonable rates if you negotiate hard, but lending standards are clearly much tougher.

The FDIC is 20 billion in the red propping up 2 trillion – so when 1/3rd of the community banks go south I’d expect the rest to go on holiday.

I really wonder whether, in a rare departure, you’re buying into the Wall Street echo chamber here. Especially regarding lending to businesses.

“Credit Crunch! Save the Banks!” (Repeat.)

From all I can gather, the decline in credit is largely a decline in demand. (People discount this as bankers making excuses, but that doesn’t make sense to me–banks make money by lending, especially when they’re borrowing at zero. And they’re loaded with cash and reserves.)

Businesses don’t take out loans for expansion when they don’t have demand, or prospect of demand.

Here’s some pretty convincing evidence; there’s lots more out there.

http://www.asymptosis.com/the-sky-is-falling-business-lending-down-1-2-percent.html

Is this Credit Crunch meme just a bunch of cheerleading for a financial industry that’s several times larger than is necessary for a thriving economy?

A few people need to go to jail still. If we dont see some big boys paying the price for fraudulent activity you can kiss any hope of social cohesion goodbye.

Remember the movie “Slapshot” starring Paul Newman? He decides to play the last game straight (Eddie Shorr–old time hockey.) Then the GM tells him there are scouts in the stands “from every team in the league.” Newman’s reaction? “Scouts?” If Wall St. gets a whif Joe on the street suddenly has dough, we’ll be in the same predicament.

But prior to you providing “joe on the street” with more dough, the “creativity” of Wall St. & banks needs to be curtailed or we’ll just be right back where we are now in two years’ time.

That is the EXACT question to be asking. Loans are demand driven NOT supply (reserves) driven.

So the next question is how do you increase demand for loans? Decrease the taxes of people earning under 150,000, I’d say no taxes at ALL on your first 150,000 for at least two years. Of course this will cause the deficit to rise so the next thing to do is to get people to understand that the deficit is MEANINGLESS. Our incoming taxes do not need to match up with spending because once again, like the ‘money to loan’ notion above, this is 180 degrees from how spending/taxation flows. Money needs to be issued BEFORE it can be taxed. That is how it works

Tying our spending decisions to our tax collection rates is not necessary always and everytime. It may be nice at times but certainly not a necessity. Now is one of those times we need to make sure we tax way less than we spend.

gbgasser, above, makes a good point–one, far too many, overlook(-ed)

In truth at some banks they have such poor balance sheets that the amount they have to charge customers in order to make a profit is prohibitory for too many people. Especially when peoples wallets are shrinking by the week.

This may sound like nit picking but its not. Thinking that banks need money to lend leads one to useless policy prescriptions like the ones offered by W and O (In truth big Ben has been the one I know) which increase a banks reserves to “stimulate” lending while ignoring policies to actually help customers have more money so they can pay off loans and seek more loans.