>Show Me The Money

>Tea Partiers have arrived in Nashville for three days of hollering about government spending, which I find amusing. Just curious, folks: if the government doesn’t spend money at this moment in our economic crisis, who do you think will? Because near as I can figure, everyone else has hit their miser button. People are not spending money on anything, and neither are those institutions which pre-meltdown were the engines of our economy.

Let me explain. Mr. Beale and I have gone a few rounds with the bank recently as we try to complete a re-fi on the house. We started this process, I kid you not, back in August. I’ve owned two houses in my day, refinanced both, so this is my fifth turn around the home mortgage block and I’ve never been asked to jump through so many hoops or had so many bars moved on me before. We are not happy.

Keep in mind: I have excellent credit, no debt, and my house is still worth considerably more than what I’m asking from the bank. In other words, I’m among the least risky customers this major lending institution will see walk through its doors. Yet they are treating me like a low-life criminal. In fact, they are asking so many bizarre questions that I now suspect they are simply fishing for a reason to say no.

In short: if banks won’t give me a loan, they won’t give anyone a loan. They are holding onto their money with both hands, and they won’t cough up one dime.

And it gets worse. I’ve heard from business people in our community that they cannot get loans, either. And if a business can’t get a loan, then what will drive our economic recovery?

Yes, to a certain extent this re-settling has been long overdue. As a nation, we’ve floated on a sea of debt and promises for far too long, and it was bound to catch up with us. But I do think, as President Obama himself pointed out, that the pendulum has swung too far the other way. It’s probably good that people are saving their money, that businesses are being challenged to use more real capital to finance whatever they want to do, that banks aren’t handing out loans to people who declared bankruptcy in the past 90 days. But by refusing to make even reasonable loans, it’s leading to unemployment and prolonging the economic collapse. Unemployed people do not spend money.

So who is at fault here? What the heck is going on? The banks are blaming the government, and the government is blaming the banks. And I have no clue which party is lying here, except to say in my own dealings with my own bank, they’ve behaved like huge dicks. I’m sure there is plenty of blame to spread around.

A prominent person in our local real estate world has said there is a new government rule limiting how vested a bank can be in one area of the economy when it comes to making business loans. So, for example, there’s a limit to how many real estate development loans a bank can make in one city, and because Nashville was such a real estate boom town, local banks are maxed out in this business sector. As a result, he says, he can’t get a loan for any development projects.

Now, let me say, that sounds like bullshit to me. But what do I know? Has anyone else heard that?

I bring that up because the Administration wants to funnel $30 billion worth of TARP funds to small community banks so they can make loans to small businesses. Problem is, the community banks don’t seem to want the money. They say they don’t need it and even if they did, there are too many “onerous restrictions” on the money to make it attractive. ABC News reported:

To entice community bankers to use TARP funds, says Mr. Merski, Congress would have to change restrictions on dividend payments, a provision that gives the government partial ownership in the recipient banks, and the cap on executive compensation.

“The key is to remove all those onerous restrictions,” says Merski, who doubts Congress would agree to do so. “On top of that, the cost of the TARP funding is extremely expensive, so they would have to change all these rules and restrictions to make it viable.”

Merski represents the Independent Community Bankers of America. I just want to call bullshit, bullshit, bullshit all over the place. What the hell? Can we get a straight answer here? I don’t think taxpayers want to see TARP funds used for executive bonuses and political contributions. That’s not onerous, it’s common sense. We don’t want to see TARP funds going to Dubai. That’s not an onerous restriction either.

Neither is paying interest, though that depends on how much interest has been charged. How about one percent? I’ll take one percent.

I’m just not getting what the complaints are about.

Our economy needs money, and the banks don’t seem to want to give it out. And let me add, if we hand over TARP funds to a community bank, what makes anyone think they will make the loans? The major institutions sure haven’t.

I’m getting pissed off here. And I’m not the only one. I’m sure we’ve all heard of the Move Your Money campaign. The movement is spreading: in New Mexico, two state legislators have proposed moving the state’s $1.8 billion away from Bank of America to community banks. Ouch. Memo to BofA: keep pissing people off and you might find yourself small enough to fail.

But is there reason to think a community bank will behave any less dickish than a big national institution? Sounds like we’re hearing the same whining from the community banks that we heard from BofA.

In Oregon, gubernatorial candidate Bill Bradbury has suggested forming a state bank. His Bank of Oregon idea is very intriguing:

Under the proposal, all state government agencies would be required to deposit their funds in the bank. The lender would then invest the funds within the state, with the investments serving as an economic development tool. It would also attempt to turn a profit, like a typical commercial bank.

I like this idea. If the banks are saying the government is putting too many restrictions on them, then screw it. Let the government start its own bank to make loans.

Sound socialist? Meh. It’s worked for North Dakota for nearly 100 years.

Anyway, this post has rambled on long enough. But I’d really like to hear some ideas on how we move through this. Anyone?

23 Comments

Filed under banks, economy

23 responses to “>Show Me The Money

  1. >I have no ideas. I do agree about the state banks idea. Sounds rather like the old version of savings and loans.Community banks are also complaining that the fed. bank inspectors are slowing them down because the inspectors are afraid they will miss something again.The banks have so many problems I just plain feel sorry for them-not.I feel sorry for all the Tea Partiers' too. They are picked on also. "Bless their little hearts."I just read where the financial folks of NY are hurt that Schumer is not being as nice to them. Every financial sector executive has worked so hard for their bonuses. They did, really they did. Just ask them.Anyway, good luck with trying to get your new mortgage.

  2. >SoBe, I wrote on this subject several months but could not find the link, so I'll wing it.Yes, you are quite right about the subterfuges used by loan officers, that are no doubt scripted in back rooms at the banks.The TARP bailout was mismanaged from the start. If you recall, when former SoT Paulson raised the red flag in the last months of the Bush admin, it started as a 3-page memo with no strings or guidelines. The purpose of TARP was to free up capital. The banks took the money to shore up their bottom line (witness bank profits over the past year) but did not use the funds for the purpose intended. My original post discussed restrictions that should have been imposed at the time:1 – Mandatory use of TARP funds targeting business and consumer loans;2 – A moratorium on lobbying and political funding as long as TARP funds remain outstanding (shall we call this a fundamental "conflict of interest" with respect to the use of public money);3 – A moratorium on bonuses, options, and exec. benefit increases during the loan period.I probably missed a few other points, but you get the idea.

  3. >Octo –I know some of those restrictions are in Obama's $30 bil TARP to community banks plan, and are exactly the things the banks are complaining about as being "onerous."I guess they didn't get the memo about the point of TARP being to free up capital for American businesses and homeowners, not, you know, bonuses for bank presidents.Un. Believable.

  4. >But by refusing to make even reasonable loans, it’s leading to unemployment and prolonging the economic collapseDefine "reasonable" What may be reasonable to you may not be to your bank. Also, the banks aren't going to be eager to lend while the government keeps blaming them for everything and talks about taking punitive measures against them.BTW – Why are people so insistent that the "solution" in a bad economy is more debt (on both a personal level w/ loans and a gov. level with out of control deficit spending) Have people learned nothing from what just happened to the economy?A problem caused in part by irresponsible debt management cannot be solved by more of the same.

  5. >just read where the financial folks of NY are hurt that Schumer is not being as nice to them. Every financial sector executive has worked so hard for their bonuses. Meanwhile Schumer and his buddies get automatic pay raises regardless of performance, and all federal employees are getting unprecedented pay raises & bonuses.We're in the middle of an economic downturn and the Feds are acting like they've just got their hands on a bunch of party money! Woo Hoo!

  6. > all federal employees are getting unprecedented pay raises & bonuses.Um, no, not unless you mean unprecedentedly LOW. It's just 2% for 2010. That *may* cover the cost of living increase, though with rising gas prices I'd say that looks more like a pay CUT.But if you want to defend investment banks giving their executives an average-sized bonus of $565,000 well, good luck with that.Dude you need a little reality check. You seem to have drunk some kind of "government bureaucrat fat-cat" Kool Aid and it just isn't true.

  7. >Why are people so insistent that the "solution" in a bad economy is more debt (on both a personal level w/ loans and a gov. level with out of control deficit spending) Have people learned nothing from what just happened to the economy?Governments spending more money during a deep recession is what works. Unless hanging around waiting for corporations and individuals to do it is working out for you.I thought "what just happened to the economy" is that we let some bidnesses get too big to fail, and every business is in danger of their customers running out of money. And unless you were concerned about out-of-control deficit spending when times were good (mainly for the rich, and corporations), that doesn't carry a lot of weight now.Also, the banks aren't going to be eager to lend while the government keeps blaming them for everything and talks about taking punitive measures against them.Why, because they're not in the mood? Stop trying to make corporations' motivating factors emotional. They lend when it's useful to their balance sheet. I'm not talking about details here, but the goverment is supposed to be in the business if governing, which means putting conditions on stuff like that when lending huge amounts of money to corporations who are basically saying "If I go down, I'm taking you all with me".

  8. >Mike W: Why are people so insistent that the "solution" in a bad economy is more debt (on both a personal level w/ loans and a gov. level with out of control deficit spending)Re-financing your house does NOT mean taking on more debt. For some, it means less debt and lower monthly mortgage payments. For people who took out loans in the 1990s and early 2000s, interest rates were above 6% on average and in some cases 7%. Refinancing at 5% saves several hundred dollars monthly in interest charges. Get it?Refinancing can mean the difference between keeping a house v. foreclosure. Get it?No economic downturn was ever fixed by reigning in deficits. In 1937, FDR did exactly that … cut Federal spending, which caused the recession of 1938. Get it?Mike W: Get a life, get an education!

  9. >Hot off the press: Reuters: consumer credit down for 11th straight month:“The current string of 11 monthly declines in consumer credit is the longest since the Fed began keeping records in 1943 and the 10.6 percent drop in November is the sharpest decline in percentage terms since June 1975. Total credit has fallen in 15 of the last 17 months and had not fallen in a decade before the current string of declines began in August 2008.”Nuff said.

  10. >Mike W: Get a life, get an education!Leave it to a liberal to throw out the insults. Is that all you folks are capable of?SoBealehttp://www.usatoday.com/news/washington/2009-12-10-federal-pay-salaries_N.htmObama & the Dems (and you) keep complaining about how the banks shouldn't be paying out bonuses (even those that people had previously been contractually obligated to receive) yet you have no outrage when the Feds pay out bonuses. I guess it's only bad in your mind if the *evil* private sector does it.Congress also gets automatic pay raises while bitching about the private sector and telling others they need to "sacrifice" yet no one in Congress is giving up their 6 figure pay.Oh, and I need a reality check? Says the woman living in perpetual gun control la-la land and has made entire posts that are flatly factually incorrect? I can't help but find that amusing. When I do that I amend my post to fix the factual error and I make the change known. I haven't seen you do that once. Why? Do you have no moral issue with lying in order to further your cause?

  11. >The government, whether Federal or state, doesn't give bonuses. That evolved over time as a response to cronyism. Giving bonuses out to be based on doing something that deserved recognition when the company fas a good year. My father ran his own corporation for decades. He made $10,000 a year max. If he led the company well that year and increased sales, added new products or product lines, he could get a bonus, but there were no guarantees.

  12. >"Meanwhile Schumer and his buddies get automatic pay raises regardless of performance, and all federal employees are getting unprecedented pay raises & bonuses."if mikey's sayin' it, it's gotta be true.But what he conveniently forgets is that ALL of the congress critters get them there checks, including the reptilicans who are SO upset about wasteful government spending.

  13. >Dude did you even READ that story you linked to? It says nothing about "automatic bonuses." It's talking about a 3% salary hike RECOMMENDED BY BUSH LAST YEAR. And it's for 2009, which was set by Congress in 2008.For 2010, if you read my link, Obama has CUT the increase to 2%. There is nothing automatic about it, it's set by Congress each year.Personally I don't think a 3% increase is excessive, and your link also mentions that those making the biggest salaries work for the Defense Dept. Big shocker. I'm totally fine with slashing the Pentagon's budget a healthy 25%. Let 'em eat cake.

  14. >Mike W: "… perpetual gun control la-la land …"Ahh, so YOU are that gun-toting domestic cyber-troll everyone is talking about. For months I have been shopping around for one …. for my cat to torment. Purrfect!

  15. >early on in this mess, a friend told me, "there isn't enough money on the planet to fill the hole that is the Big Shitpile." banks are hanging on to the money bc they know that there will be an accounting, some day, a real one and some people are going to lose their heads. far too many of our TBTF institutions were playing fast and loose with nothing, a lot of meaningless paper built on castles of sand, etc. i can't emphasize this point enough. esp in a time when we're told by Our Leaders that it's time for personal "austerity" and "responsibility." we're expected to make do with less, but these jokers get unlimited government bailouts, "or the economy gets it?" from where i'm sitting the economy has already "got it," which is to say there are no jobs, no lending, no new businesses, and the state govt is running out of money. it's ugly, and it is going to get worse before it gets better. i really don't care if a thousand wall st. banksters suddenly become unemployed and homeless. nope, i don't.the federal government can pretty much do what it wants to. it's got nukes and the Constitution and a bunch of other shit. when the ruling party wants to change a market, nationalize an industry, wage a war, etc., it does those things. the case of regulating corporations is actually very clear. if "the economy" is at risk, well. that's National Security! call in the shock troops! no small group of executives should be allowed to hold a democracy hostage. people who lie, cheat and steal get no sympathy from me. right now, there's a paper trail which says my nephew's children will be beholden to a multi trillion dollar debt arrangement made with banksters who will likely be dead when they are asked to pay. i am going to do everything i can to teach them to answer "no" to that, even as i will over the course of my life. -CD

  16. >Mr. Octopus:Mikey is, if nothing else, quite predictable. He's never seen any proposal about anything–that might cost HIM something–that he likes.

  17. >Democommie, if I understand you correctly, what you are saying is that Mikey doesn't like to spend money.One can spin this two ways: Either Mikey is thrifty (a virtue) or he is miserly (a fault). From what I read regarding Mikey's sour disposition, I'd say he is too cheap to go on a date.

  18. >Dude did you even READ that story you linked to? It says nothing about "automatic bonusesComing from you that's funny given your gun control pieces where the articles you used to bolster your position did exactly the opposite.Perhaps you need to read, since I didn't say anything about "automatic bonuses"Anon – Nothing should be "too big to fail" We bailed these guys out, which only reinforces the bad behavior and irresponsibility by telling them that if they fuck up bad enough the .Gov will just come in and save them by throwing money at the problem.

  19. >Ahh, so YOU are that gun-toting domestic cyber-troll everyone is talking about. For months I have been shopping around for oneI am? News to me.

  20. >mikey said:"Meanwhile Schumer and his buddies get automatic pay raises regardless of performance, and all federal employees are getting unprecedented pay raises & bonuses." but, no, he didn't use the words "automatic bonuses". Of course his statement is still horseshit (and he's aware of that) but like most neocan'ts he's got lots of good ideas that he's not sharing. mikey, when can we come look at your Gays'n'Guns blog?

  21. >mikey, when can we come look at your Gays'n'Guns blog?Don't know. I never claimed to have one.When can we see proof that gun control lowers violent crime rates, or that California has "relatively lax gun laws?"

  22. >mikey:As you are well aware, the CA gun laws thing is only a problem for you. I said "relatively lax" and you jumped all over it. I also said that it was relatively lax–when compared with some other states.Now, then, you said, about a month ago that YOU support Gay rights just as much as you support gun rights. Obviously you were lying, but since you haven't got the grace to admit it I guess I'll just keep on bringing it up.You are a very silly and angry boy and you really should work on both of those vices.You could avoid having to be confronted with your rank dishonesty, if you would just hang out on blogs that are infested with people who actually think you have something of value to add to any conversation. I'm fairly certain that this blog isn't one of them.