What are the Banks Doing With Your Money - They Are Not Using it to Simulate the Private Sector--That means that they are not using your money to stimulate the economy through growth in the Private Sector. That is accomplished by lending to Developers and to Homeowners. Growth in the Real Estate Industry has long been seen as the backbone of prosperity for the U.S. economy and for us all. The dream of every American to own their own home has been a ground base of stimulation and growth for our economy.
I've had this huge question in my mind since the October 2008 Bail Outs and that is....what happened to all that money. If we can't get loans for the Consumer then where is all that money?
The fact is we can't get loans for the Consumer. We all know that there is no longer a 21 day escrow. We are lucky if we can get it done in 60 days. I had a 90 days escrow on a FHA loan. I kept having this thought....what is going on with the Banks?
So I am going to share this link that David, my husband gave me that pieces the puzzle together for me. I am not an authority on this subject and so I cannot verify from a "connecting the dots" point of view if this fits with what is going on in the U.S. economy. I can say that it makes sense to me in terms of what we see going on with lending to the Consumer?
It even becomes more eye-opening when you ask the question "So if the bail out money is not being used to lend then what are the banks doing with the money that the Consumer deposits with the bank?"
Here are two excepts from the article:
- The Wall Street Journal, for example, on Wednesday reported in an article entitled “Lending Falls at Epic Pace” that last year’s decline in lending is the biggest since 1942.
- If we mark the beginning of the financial crisis with the collapse of Bear Stearns in March 2008, data from the Federal Reserve show that since then bank lending has declined by $220 billion. During this same period, banks increased the amount of US government paper they hold by $337 billion.
It all makes sense to me and will not let me sleep well tonight! Inquiring minds must know. I would love for Jeff Corbett to give his perspective on this article and the ramifications of what is occuring. Why would the goverment and the banks enter into this death spiral? Is it intentional?
What should we do and how can we be effective in helping to change this economic mess ..... I searched for a word and do not have an appropriate word for the descriptive magnitude of how I see this trend. I don't know what to call this and remain objective.
I hate being helpless and having to watch something horrible that I have no control over. I feel like I'm tied up in the trunk of a car and just came to!
What are the Banks Doing With Your Money - They Are Not Using it to Simulate the Private Sector--Inquiring minds do want to know. What say you?
I am Jeanean Gendron, your Redding and Shasta County Specialist. I can be reached at 530 276-7417. I answer my phone.
Jeanean,
I believe they are keeping it on their balance sheet and in reserve, hoping for some miracle in the economy to erase the steep realized losses they face. Our banking system mirrors Japan in the early 90's when we first encountered zombie banks. Until these loans are marked down (to zero in some cases, unless land is underlying collateral) AND the government forces repayment of TALF/TARP then the banks will continue the Kobuko dance of attempting to re-engineer -- without substantive measures taken.
Andrew, this was what I was afraid of here. I so don't understand your comment. Please don't take offense. This is not my area of expertise...so it makes sense that I don't understand your comment. I did understand the article however, and that it the point that so makes sense to me. I do want dialog here about what it all means and most likely...I'll just stay out of the mix. I want to thank you for coming in on the discussion. By the way...I love the look of your blog and your posts. Great photography. I'll be back to visit often!
Jeanean, it is frustrating to see that the money is not filtering to consumers. Banks still have a lot to learn, as does our government.
Jeff, I'm not sure if you read the post or the article.
Banks still have a lot to learn, as does our government....
I have no response to that comment. I do appreciate you stopping by and would like to have your invested engagement in this topic.
I try to read the WSJ everyday. I read the article you flagged. The banks have stopped lending. You are correct. So where's the money? There's as much rampant fear in the executive level as there is on the homeowner level.
Hello Andrew, thanks for coming back and adding value to the post. I appreciate it. It has been a puzzle for me and I guess not just me. The things that scares me most is that it's been the plan all along. Thanks for coming back!
Jeanean, We are closing loans here. But you are right things are tough out there. From the banks standpoint they are looking at clearing foreclosures and seeing home prices driven down. Then the owner walks away with little or no consequences. I am not making a case for the banks and they did take the tarp money. All I am saying is the problem from the lender side is how do they secure their investment. If they cannot answer that questin then they are reluctant to invest , whether it is in housing or anything else
Charlie, I so not up to this discussion, however if your premise stands then why are they not lending on TARP money or even depositor money. Something is fishy and I can smell it! Help us figure this out! Thanks Charlie!