Why Aren’t Banks Loaning Their Money?
Nearly 50 years, from 1958 to 2008, according to the Texas A & M Research Center, Banks really held no excess reserves. Then in March, 2010, the reserves reached an unbelievable $1,120 billion. These excess reserves are like gasoline pooling in the bottom of a barbecue grill full of smoldering charcoal. The Fed has poured all this massive amount of gasoline to try to ignite the fire. It has not worked.
Banks usually have required reserves and excess reserves. They usually don’t keep as much in excess reserves. They don’t make as much of a profit from funds held by the Feds which range from 0% to ¼%, according to the Texas Real Estate Center. Banks are sitting on all this money. Why are Banks not making loans to consumers and businesses but are having more fed funds? It looks like they feel it is a risk-free return as the best investment option. Question is how is this going to affect future inflation?
I’m not an economist and really don’t understand how Banks work but I do know that we have too many restrictions in getting loans right now. I’m not talking about 100% financing and anyone can get a loan and everyone should buy a house. I’m talking about common sense lending that takes in the whole picture of a borrower rather than just using the FICO scores!
Nearly 50 years, from 1958 to 2008, according to the Texas A & M Research Center, Banks really held no excess reserves. Then in March, 2010, the reserves reached an unbelievable $1,120 billion. These excess reserves are like gasoline pooling in the bottom of a barbecue grill full of smoldering charcoal. The Fed has poured all this massive amount of gasoline to try to ignite the fire. It has not worked.
Banks usually have required reserves and excess reserves. They usually don’t keep as much in excess reserves. They don’t make as much of a profit from funds held by the Feds which range from 0% to ¼%, according to the Texas Real Estate Center. Banks are sitting on all this money. Why are Banks not making loans to consumers and businesses but are having more fed funds? It looks like they feel it is a risk-free return as the best investment option. Question is how is this going to affect future inflation?
I’m not an economist and really don’t understand how Banks work but I do know that we have too many restrictions in getting loans right now. I’m not talking about 100% financing and anyone can get a loan and everyone should buy a house. I’m talking about common sense lending that takes in the whole picture of a borrower rather than just using the FICO scores!
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