Small businesses can't get loans from bailed out banks - Bloomberg-BusinessWeek.com

[JohnWxy]

Here's a big part of the reason the recovery is so slow. Formerly risk oblivious banks are now afraid to make loans to solid business accounts, even short term loans.



http://www.businessweek.com/news/2010-09-16/small-business-can-t-get-loans-from-bailed-out-banks.html

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Trading, Not Lending

The U.S. government helped Wells Fargo, JPMorgan Chase and Bank of America back to health with $189.3 billion in loans under the Troubled Asset Relief Program and debt guarantees through the Federal Deposit Insurance Corp. The rest of the country: not so much. That’s in part because of policies the Federal Reserve has instituted to help banks, said Peter Morici, an economist and professor at the Smith School of Business at the University of Maryland in College Park.

“We’ve created a system that encourages bankers to trade, not lend,” Morici said.

A record 41 percent of small business owners say they can’t get adequate financing, up from 22 percent two years ago, according to a July report by the National Small Business Association, a 150,000-member advocacy group founded in 1937 that has surveyed entrepreneurs since 1992. New small-business loans fell 33 percent last year from 2008 to $191.6 billion, the lowest total since 2000, according to the Federal Financial Institutions Examination Council.

Outstanding loans declined 16 percent as of June 30 compared with 2009, based on the council’s data. Tighter credit makes it tougher for entrepreneurs such as Besse to hire some of the 14.9 million Americans who are out of work.
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[Raster]

1. The bank bailout was really a sham in the way it was sold to the American public.

The advertised purpose was to allow banks to return to a greater degree of solvency and thus revitalize the credit markets. The banks had no intention of revitalizing the credit markets. The only thing the banks were going to revitalize was their balance sheets, which they have done brilliantly.

[kestrel91316]

2. Banks have never in my career loaned to small businesses.

Oh, they make a pretense, but ultimately unless you already have a pile of money and don't need the loan, they have never lent a dime.

[Dawson Leery]

3. TARP was intended to get the gamblers

on the street back in business, which is why the TARP bailout was a massive mistake.
The big "banks" needed to fail. Let their bad debts and loaded books drain out.