What Is the Problem With Banks?
If you’ve been looking for a commercial real estate loan, operating credit, or expansion capital, you might have noticed that the open water is rough. Finding the right fit will require a lot of work if your sources are mainstream banks. Examining the reasons for this observation.
a brief explanation of the bank’s philosophy. If you are a main street bank, you are subject to strict regulation. After the Penn Square scandal and the Savings and Loan/Resolution Trust, the section 18 “criminal conduct codes” for banks expanded to two shelves of books, taking up a corner of my bookshelf when I first started working in banking. More intriguingly, the code violations were interpreted as “apparent” guilt rather than actual guilt based on the act, making them more similar to hunting infractions than normal crimes. If you were a hunter and a federal game warden heard a shot after legal shooting hours and discovered you coming out of the marsh from that direction with a gun, you would be “apparently” guilty of taking the shot illegally without any supporting evidence. We veteran bankers became uneasy after learning this information, decided to take a chance instead of staring the deal and the person in the face. That could be considered criminal in the “new” enlightened age! Or at least cause regulators to question your sanity and issue menacing threats about classified loan designation (write off, or at best devalued) loans. The old guard has passed away, including me, but the regulations have persisted and become more stringent in an effort to rein in these reckless banks, lessen the burden of regulation, and turn all banks into uniform, cookie-cutter gnomes.
In recent months, some of the largest banks have received horrifying fines and have seen their F.D.I.C. premiums increase. insurance. I won’t say that these were poor or unjustified, but they do show you how the banking industry thinks. Since the majority of these banks are international traders, they are unlikely to support or establish a main street in the United States of America. business anyway, and their transgression were beyond the pale, to put it mildly. The U.S. implemented the TARP program. Government, with the stated intention to “shore up” with a capital infusion from Fed funds (that’s you and me!), and let the banks “grow out” of their capital shortfall. All of this at the expense of artificial profits!
To put it plainly, the bank declined your loan and did so while enjoying your taxpayer investment. Banks have turned to tried-and-true investments that are also in line with regulators, Wall Street stocks and bonds, as a result of the regulatory paranoia. When Wall Street and the banks benefit, the economy benefits as well. Therefore, a bank “borrows” money from the Fed. pay.25%, (yes that’s 1/4% of 1%), invest it on Wall Street currently nets a spread of 3.5%–7% due to the lack of regulation. It’s understandable why the banks quickly recovered. But there are some issues with this plan. It appears that the banks accept large deposits under the assumption—let me use that word again—that they will lend the money out and support the US economy. economy… but they don’t! This currently worries the government. No expansion based on taxes, no new jobs. Due to the lack of incentives and potential risk involved, banks avoid lending to both new and established businesses. What can we do?
Reduce the rate of interest rate easing first. In order to appease their investors, this will compel the banks to make loans to the economy. To enable it, we must relax the regulatory requirements. Instead of remaining in the background as an outdated theory, let common sense take the lead. Increase competition, reinvigorate the desire to make a profit, and develop fresh strategies for bringing capital back to the main street economy. I think this administration has taken such a step. Public investment opportunities and investment platforms known as 506(C) section D were made easier to promote by the Job’s Training Act of 2012. focused specifically on reinvesting in the United States. economy. By virtue of who is permitted to participate and the S.E.C. and the states allows it as an exempt offering Being financially savvy and forward-thinking is the best advice.
