As the national struggles to recover from a recession caused by an assets bubble and loose credit, the head of the Federal Deposit Insurance Corporation argues in favor of looser credit:
NEW YORK – The head of the Federal Deposit Insurance Corp. said Tuesday she’s “very worried” that the nation’s biggest banks aren’t lending enough and warned the economy could take another turn for the worse without increased access to credit.
FDIC Chairman Sheila Bair said the FDIC’s upcoming quarterly report would show that “not many large institutions are doing a very good job of lending.” Instead, she said, some are taking advantage of near-zero interest rates by borrowing dollars cheaply to buy higher-yielding assets like stocks or commodities — a move known as the “carry trade.”
“I don’t see much money going out (from banks). I see a lot of carry trade,” Bair told a banking conference in New York. “It used to be you take deposits and you lend out money. We’d like to see more of that.”
Many banks have tightened lending standards following a wave of residential and commercial property defaults. Others say they want to lend but see little demand as consumers and businesses seek to pay off debt, not take on more.
The lack of lending by large banks is dangerous at a time when many small and midsize banks are teetering on the brink amid the economic downturn, Bair said.
“I’m very worried (that) the larger institutions don’t seem like they’re stepping up to the plate providing credit,” Bair said. “Because if they don’t do that, we’re all in the soup.”
Ma’am, it’s not the job of banks to “step up to the plate” and provide credit. It’s their job to maximize profits for their shareholders and protect that assets of their depositors. If they’re not loaning money right now, it’s because, like the rest of us, they’re unsure about the future and unwilling to risk their assets on uncertain loans.
This is exactly the mindset that got us into this mess, one would have thought that someone in Washington would figure out that credit is not a “right” and that it’s not the duty of banks to loan money to anyone they don’t consider a good credit risk.
But, you’d be wrong.
As soon as they start lending all of that capital that was shoved down their throats by Paulson/Bernanke, the inflation begins.
Easy for Sheila to say because the Big Banks are backstopped by TARP and the “Too Big to Fail” doctrine. The Citis, Goldman Sachs and Bank of Americas contribute to the FDIC insurance fund but won’t ever call on its assets to compensate despositors. Sheila’s statement is nothing more than what might come out of the mouth of any self-interested bureaucrat — deflect attention to the other guys and get it off her watch.
[...] FDIC chief: Banks aren’t lending enough (Below the Beltway) [...]