Lately there has been a lot of angst about banks not lending their new found TARP funds. Admittedly, I haven’t really been paying close attention to who these loans are supposed to go to. But I’ve heard discussions about increasing the amount of consumer loans.
Now maybe it’s just me, but it seems that most people have drastically cut back on their spending habits; even more so when it comes to big ticket items. I mean, the Super Bowl was at the beginning of the month, so there’s no reason to go out and buy that 72 inch plasma now.
Most people are worried about keeping their jobs and homes. They aren’t going to take out an EAL or ACR just to spend it. They’re going to hold on to it for emergencies, not go on a spending spree. What banks have been seeing is a lot of refinancing. I imagine that people are using the cash they receive to pay off bills or put into savings.
So if consumers aren’t spending money, who is? My guess is the thousands of small and medium businesses out there. SMBs don’t necessarily need a million dollars to execute their business plan. Actually, loans for less than $50K can do wonders for them. Also, if you look at the news, the big companies seem to be having layoffs while the SMBs are hiring.
Maybe we need to do all we can to help out small business so that they can keep hiring and producing, which will help put money back into the economy. Making loans just for EALs and refinancing just allows people to have a cushion. Lending to profitable businesses will have an exponential effect on all of us. It will certainly help more in the long term.
