Banks get mixed message: lend more and increase capital too

December 27th, 2008, 3:00 am · 3 Comments · posted by Mathew Padilla

The Wall Street Journal highlights a contradiction from government officials: politicians are very publicly calling on banks to lend more money to consumers and businesses, but regulators are more quietly telling banks to hold more capital. Can banks do both?

Although admitting bankers were reluctant to go on the record, the Journal says regulators are informally raising capital requirements and pressuring banks harder to classify more loans as troubled. The Journal reports…

Regulators are criticizing loans where there are signs that a borrower may run into trouble in the future. In good times, a loan wouldn’t receive that classification until the borrower actually falls behind on payments.

If banks are using their share of the $700 billion bailout to shore up capital rather than expand lending, that would answer my previous post: What are banks doing with your bailout money?

Read the Journal’s story HERE.

And in other news…

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Posted in: Bailout Buzz • Meltdown

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ration alley says:

December 27, 2008 at 9:03 am

Now is the time for all good (forensic accountants) to come to the aid of their country. The FDIC should be placed in the hot seat, since Hank Paulson could care less and really isn’t smart enough to do anything for the benefit of the taxpayers. The FDIC has the power to audit (thoroughly) any bank it chooses. Congress should put pressure on it to do so and provide full support that’s necessary.
The Treasury is impotent, The Office of Controller is inadequately managed, so that should place the FDIC front and center. All banks hate it when the auditors appear at the door and slap tape over the files and start asking its questions. There is recourse to reveal the bailout evidence, it just isn’t being done.
Congress should initiate action to allow/force FDIC to act NOW, before Hanky and his cohorts totally sc*w it up beyond repair.
The S&L experience is textbook material for what should be done now. And because of that this catastrophy can be handled with a more effecient and accurate procedure.

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rants says:

December 27, 2008 at 5:47 pm

read this article and learn more about the economy
than you would spending 4 years at wharton–

http://market-ticker.denninger.net/

December 28, 2008 at 10:32 am

rants: yes the Glass-Stegall Act was GOOD law, but now the congress would have to repeal the really damaging Gramm-Leach-Bliley Act of 1999. It is the foundation for all the country’s ills today. Phil Gramm made it possible for all the Madoffs, subprime mortgagors, Bear/Lehman etc. un der the guise of more services for the consumer/customer. Of course he went on to head up UBS. Worse yet, President Clinton SIGNED IT two months before he left office. PE Obama has a lot of cleaning house to do, and congress owes USA big time.

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