This is a little of topic but the gov’t talks out of both sides of their mouth, I know, no surprise here.
I am in the banking business so I speak from what I see each day. The gov’t wants bank to lend and lend some more to get help get things moving again but at the same time we have regulators in the bank as I speak critizing, scrutinizing and questioning every loan we have made in the last 6 months. These regulators don’t seem to like any single loan we have made and trust me when I say we are a relatively conservitive bank, we actually had record profits last year.
On the mortgage side, almost daily we recieve new underwriting guidelines from Fannie and or Freddie tighten mortgage underwriting guidelines which means we can make less and less mortgage loans to borrowers to purchase or refinance their home loans, many of these refinances would put hundreds of extra dollars in the consumers pockets each month but due to the stricter requirements we cannot make the loans and keep in mind the Fannie and or Freddie are already backing notes these consumers are already obligated to. These borrowers are “A” paper borrowers, not subprime.
It is a daily example of the left hand doesn’t know what the right hand wants.

Amen Brother.
As a former banker as well I agree that the right hand doesn’t know what the left hand is doing. I have friends in various banks, and in 90%+ of the cases I have heard the banks were lending until the Bank Examiners got there. After their visit, lending stopped. The Examiners in an attempt to achieve “safety and soundness” somehow feel that a foreclosed property or a closed business in liquidation is somehow more safe and sound on a bank’s balance sheet than a paying loan, albeit potentially somewhat under-collateralized. Examiners play the “what if” game…what if you had to liquidate this loan today. Few long term loans can be liquidated immediately…that’s why they are long term. In essence the examiners actions are compressing into a short time potential losses that may never occur, or would be paced out over the next 5 years or so. It would be much less expensive to all concerned to allow the loans to continue to perform. Calling a loan is what kills the individuals confidence, and as this crisis has proven, no one has any confidence in banks and more so in my estimation in Government to combat and reverse our economic problems

JYates, here is a perfect example. We have customer of the bank who has been a customer for over 25 years, this customer has had a line of credit with the bank for those 25 years secured by inventory, business equipment, accounts receivable etc., this line of credit is used to purchase raw material to make the products he produces, payroll and other normal recurring business expenses, this customer pays down the line once he is paid for his products, this customer also has a loan secured by commercial property which as existed for over 10 years now. This particular customer could not be a better customer if he tried, has never missed a payment and in most cases pays early. The federal examiners that are in the bank now seem to think we need to go back to this customer after years of perfection and ask for additional collateral or reduce his line of credit. Counter to what the President says is the problem, businesses can’t get credit to operate on a daily basis.
JYate, being a former banker if we did this how long do you think this excellent customer of the bank would be a customer of our bank? The answer is, only a long as it would take him to refinance his debt here somewhere else.

All 3 of you seem to agree. Do all bankers feel this way? If so, how does the government not know? You guys should call all of your banker buddies and ask them to sign a petition stating your point. I have never worked in the banking industry, but it certainly seems like a valid point to me.

“the problem could be avoided by having banks keep the securities on their books. The government would still take much of the downside the risk, but the banks wouldn’t have the opportunity to cherry-pick.”

All 3 of you seem to agree. Do all bankers feel this way? If so, how does the government not know? You guys should call all of your banker buddies and ask them to sign a petition stating your point. I have never worked in the banking industry, but it certainly seems like a valid point to me.

”the problem could be avoided by having banks keep the securities on their books. The government would still take much of the downside the risk, but the banks wouldn’t have the opportunity to cherry-pick.”

I doubt that a petition would do any good. Bankers are being pilloried as demons, while in fact it was mostly mortgage brokers - who are largely unsupervised - who were highly paid for pushing the shaky housing debt out. Most of the fly-by-night operators have already exited the building with the cash, leaving all of us to pay the dues.
The solution is very simple…but it requires someone who knows what they are doing to be in charge. There is a wonderful article in today’s WSJ talking about Regulatory forbearance. This is exactly what I am talking about. We all could save money. But I understand that Rahm Emanuel stated that you can’t let a good crisis go to waste. As the result we will get a bunch of pent up social spending that doesn’t address the real problems - and likely not even the symptoms. The truly sad thing is that if this doesn’t work, and I give it at best a 50/50 chance, BO will have gotten us so far down the road that we won’t have many options and flexibility to cope with the problem. I am always skeptical when people try to force me into action, and not allow real discussion of the deal before us. That usually means that the deal is weak and no one wants anyone to look at it too hard - or they might see the real cracks in the armor. He and the congress are moving their bet to the play line and tossing the dice. But if they are wrong we get to pay the tab

bantam weight - you may be wrong about refinancing. I had just such a former customer who was an active borrower. We put him in business. When his fortunes were high as a kite a couple of years ago, he didnt leave the bank. He thought he had been through so much with the bank that he had a valued business partner. He had reduced debt from nearly 2 Million to right under 1 Million. Secured, but possibly not to strict margins he was - out of the blue - asked to leave the bank. No notice. New credit advanced 90 days before. Had one bad year. His father died. He took his eye off the ball.
I worked with him and pitched the deal to 5 or more banks. None would make him an offer. All had just been visited by the examiners. One was in the exam as we started negotiating. By decision time, the bank was no longer making loans. In the meantime, beyond trying to find a new bank, the prospects for the company returned to its former performance. Sales up. Profits up. Cash flow up. It took over 6 months to find a bank still in the business of lending. Its disgusting