Those Greedy Bankers Are Ruining The Economy!

~or~

Those Greedy Bankers Still Want to Have a Job Next Year!
__________

Pick the headline you prefer.

I was driving home last night and heard once again the banks are being blamed for not lending enough money to get the economy back on the insane inflationary schedule we had a year ago.

The banks are not the problem! It doesn't matter how much blame they catch from the Bush administration, the alphabet networks, or anyone else, it's not their fault.

For years and years, when it looked like everybody was going to have an ever-increasingly large number of dollars banks were making loans that were . . . not such a great idea. But hey, everybody was making payments, so what's wrong with a jumbo loan with a 0.8% interest rate? We're still making money because they're still making payments right?

Well now, they're not making payments anymore. A banker is a business man before he is a guy with a fist full of money to hand out. If he lends money that will never be paid back, he loses it. If he lends money to someone who may not pay it back he can do two things:

1) just be fine with losing a few billion dollars here and there

2) charge higher interest rates

1 is not going to happen in a capitalist society*. 2 is underway, which is why you can now get the same loans for 15% interest.

Why do they do that? Can't they see they are hurting the economy?

Look folks the bankers that lose money lose their jobs when they run out of money. If you lose your job as a banker, the economy takes a hit. If a bank closes, the economy takes a much bigger hit. Staying in business is one way of helping the economy. Also it's convenient for being able to get groceries to feed your wife and children. So, higher interest it is.

Of course, 30 years ago, 17% was not out of the question, when you also had to be super credit-worthy AND had a big down-payment.

If you are lending to someone with a bad risk of default, you charge higher interest. That way, you get a lot of interest money in the beginning of the loan, and it is hoped that they have at least covered your costs when they default on the loan. High interest loans are not bad bankers being mean to John Q. Public trying to smash the economy, people.

It's good banking. There used to be a saying "the only way you can get a loan is to prove you don't need it".

That kind of banking is back for a while. Get used to it.

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*We don't have capitalists running the country and won't for a couple of years yet, which is why Bernanke et. al. are lending money at effectively 0% interest. They don't CARE if the taxpayer loses money, they just want all the numbers to be green instead of red. That is also why $350,000,000,000 of your tax dollars have disappeared in a month or two. Everyone with a lobbyist who needs credit to stay in business is borrowing from the Fed. The fed has finally screwed over the economy to the point that they have become the lender of ONLY resort, and the rest of us are left to put down a fat down payment on a loan with high interest from private banks... when a year ago it would have been low interest with no down payment. c'est la guerre.