Monday, March 16, 2009

Obama to banks: Show us - every month - how much you're lending

(Updated below with new lending numbers for January)

The Obama administration is seeking to address one of the largest frustrations with his (and George Bush's) bailout plans - that they haven't prompted banks to lend enough money.

Officials announced Monday that the 21 largest banks receiving government money must report monthly on how much lending they do to small businesses, the Associated Press is reporting.

All other banks getting taxpayer help are being asked to report quarterly on small business loans. Even banks that are not taking government funds are being told by the administration to “make an extra effort” to increase small business lending.

The nudge - or perhaps, shove - is part of a larger proposal designed to help small businesses, which Obama called “one of the biggest drivers of employment that we have” this morning.

Reports the AP:

Obama said he pressed his economic team to specifically help owners of small businesses and get credit flowing to them again, and he called the newest initiatives only a first step.

The measures includes $730 million from the stimulus plan to immediately reduce small-business lending fees and to increase the government guarantee on some Small Business Administration loans to 90 percent. The government also is taking aggressive steps to boost bank liquidity with up to $15 billion aimed at unfreezing the secondary credit market.

Often primary bank lenders will seek to sell the SBA loans in the secondary market, allowing them to use the proceeds of the sale to make new loans to other small business owners, but skittish investors have been staying away. Under the administration's initiative, the government will step in to buy these loans to help unlock the frozen credit market, using money from the recently passed bailout package in the range of $10 billion to $20 billion, one official briefed on the plan said.

While the SBA typically guarantees $20 billion in loans annually, new lending this year is on track to fall below $10 billion, according to the administration.

(Updated: 6:35 p.m. - More evidence of the problem, from the Treasury Department.

In monthly report today, Treasury said that lending to businesses from the top banks getting bailout funds fell in January despite the billions of dollars the banks received in government support, the AP reported.

Lending on regular business loans and on business loans backed by real estate both declined in January, compared to December. The findings were based on reports filed by the top 21 recipients of rescue money from the government's $700 billion financial bailout fund.

The report attributed the decline in loans banks made to businesses in January to weakening demand on the part of businesses, reflecting the dismal economy.)

19 comments:

JAT said...

Classic. This is EXACTLY what got us into this mess -- politically motivated lending without regard to soundness.

As someone who has written about the banking sector since the early 90s, all I can say is, good luck with that.

Prepare for hyper-inflation, America. At least it will be bipartisan.

Anonymous said...

JAT, I recognize you! You're the guy who said that the Soviet Union would attack us in the early 1980's! Good to see you still posting!

Anonymous said...

I believe the first bailout plan was not Obama's, it was Bush's, and this was the one that had no oversight and did not lead to increased lending.

Anonymous said...

To understand the impact of government mandated lending programs, read The Trillion Dollar Meltdown by Charles R. Morris. Very enlightening.

pstonge said...

Anon, 1:01: Thus far, lending hasn't increased significantly under any plan, analysts say. But thanks for noting Bush's bailout, as well.

Peter

Anonymous said...

I did read the Trillion Dollar Meltdown - It is the first root cause analysis I've seen that made sense. It was written before the meltdown in the economy! He now has a new edition, the Two Trillion Dollar Meltdown that I have not yet read.

Anonymous said...

JAT is exactly right. Best post I've seen on this stupid newspaper website.

Anonymous said...

Taxpayers to Obama: Tell us - every month - how much you are increasing our debt.

Anonymous said...

http://www.huffingtonpost.com/charles-r-morris/wall-street-as-black-hole_b_92459.html



Interesting posts, almost one year ago to the day, someone forwarded this the other day though for a different reason. Read it twice.
__________


Is 'stimuless' now turning into forced lending? Just listened top Obamas speech on the way in.

Anonymous said...

Sounds good. Maybe Geithner will be able to use some of his "staff" to assist in this oversight.

Last I heard there were 3 (yes, THREE) of them working on saving our entire economy.

More say whatever it takes that SOUNDS GOOD while he continues to SCREW all of us!!!!!

When everyones blinders fall off and they see these lies (like "no earmarks" to "well...just this time but next time I am gonna be TOUGH").

He will say whatever it takes to stay in our pants...............pockets!!!

chupacabra said...

If the point of handing all that money over to the banks was so that they would loan it out, then why not make them report on what they actually do with the money.

It sure beats what AIG is getting away with.

Anonymous said...

Sounds to me like there are two issues here:

1. Show us how much you're lending
2. Lend x dollars to x type companies.

The first is transparency and communication and I like it.

The second is socialism and I don't like it. I'm ok with tax breaks for certain types of companies to encourage growth and innovation in one area but don't force it or we'll get out of wack again.

Anonymous said...

Go to the Tea Party revolution on April 4th and April 15th.

Anonymous said...

Amen to the government being a bunch of fools. Everything they have done so far has been politically driven. NOTHING they have done will stimulate the economy. In fact, we would probably all be better off if nothing had been done and a few entities had failed! Probably less job loss, too.

Anonymous said...

I think the president should make them do just that show what they are doing with the money. On a monthly basis.

Anonymous said...

So we are going to force banks to lend to people, regardless of the merits? So we create another bubble by using easy credit and high-risk lending to solve the problem caused by the bubble created by too much easy credit and irresponsible lending? That really makes a lot of sense....

Anonymous said...

This is a crazy idea. This is the definition of insanity. Doing the same thing but expecting different results. Let the free market work!

Anonymous said...

If the banks are not forthcoming about how they are spending this stimulus money, the Obama administration should NATIONALIZE the banks.

Anonymous said...

One simply cannot read these comments without coming to fear that self-interested politicians can do whatever they choose with a willing population if they will simply incite panic.

There is not a problem for traditionally qualified borrowers in getting a loan. there IS, however, a reluctance by business persons to start or expand enterprises in an environment in which markets are unstable and government openly asserts the right to confiscate "excess" compensation (read profits). There's probably someone in DC who understands that government tinkering and lack of direction is the proximate cause of uncertainty among business persons, but it is apparenlt in their interests to play to calss and wealth envy rather than deal with reality, and the drooling masses are only too willing to be stimulated to believe that AIG honoring it's contracts is the root cause of the economic crisis.