We still don’t understand it when people yell “lend dammit!” to the banks, as if that will somehow help the economy. Banks have slowed their lending because of a lack of good opportunities, and the government gave them cash not just to keep credit flowing, but to repair badly damaged balance sheets.
WSJ: Publicly, officials are pushing banks to make loans, tweaking them for taking government money while they tighten lending standards and turn away borrowers with less than perfect credit records. Privately though, some bankers say regulators are urging them to build capital cushions that are considerably thicker than what is officially required to be classified as a healthy institution.
Other banks are being forced to set aside more money to protect against losses on loans normally considered safe.
Regulators themselves are under criticism for failing to prevent reckless lending practices that fuelled the credit crisis. Now, with bank profits plunging and troubled loans soaring, federal regulators say the tough talk will help gird the industry for even more pressure amid a potentially deep recession.
Hey, as long as it’s all the public grousing is a show meant for cable news, Congressional hearings and op-ed pages then it’s alright with us. If in private banking regulators were echoing this, we’d be concerned.
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