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If You Lend It, Maybe They Will Come

February 20, 2009 Leave a comment

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.

Categories: Lending, Small Business, TARP

Control-Alt-Delete

January 5, 2009 Leave a comment

Well, what a year 2008 was.  Right now, a lot of people are wishing they could just do the ol’ three-finger salute on the whole banking industry.  Between the sub prime crisis, close to 30 bank failures and Big Daddy Madoff, it’s no wonder.  Getting back to basics is what is needed to turn everything around in 2009.

I’m really looking forward to seeing what this year brings.  For one, I believe SMS will emerge as the standard in mobile banking.  Last year, a lot of banks started researching this channel.  This year, we will begin to see a lot of rollouts.  In our market, we’ve already seen a few banks launch a mobile banking product.   I’m sure there will be even more announcements by the end of the year.

Seeing how the receivers of TARP funds use their new capital will be interesting also.  I suspect that a few banks will use their excess cash to pick up a competitor or two.  Also, will we lose one of the big three this year?  Citi is looking kind of shaky right now.  Bank of America still has to integrate Merrill Lynch.  If the next fallout happens in credit cards, both could be in even more trouble.

All in all, I’m excited about what this year may bring.  With a new administration, I expect to see some major changes.  Here’s to brave and exciting New Year.

Categories: Bank of America, Mobile Banking, TARP Tags:

Two Wrongs Don’t Make a Right, But Three Lefts Do

November 24, 2008 Leave a comment

Ken Lewis says that “two of the struggling Detroit automakers should combine and prove to the government they are worthy of a $25 billion rescue package.”  It’s statements like that, that make me worry about Bank of America pulling through this financial crisis.  Mr. Lewis is proposing that two failing companies combine so that they can be an even bigger failing company?  I am unable to comprehend how this is a good thing.  US automakers have been in trouble for years.  There’s a reason that foreign cars are the best sellers in this country.

I’m sure most people know that US automakers have fallen woefully behind.  A bailout isn’t going to help very much, it will just slow down the inevitable.  Some fundamental changes have to be made in the US auto industry.  Megan McArdle gives a very good explanation of one problem that the auto industry needs to overcome in order to survive.  Chris Yeh has another perspective on helping banks but letting automakers fail.  Perhaps failing may be the best thing for the auto industry.  Certainly, funding a failing industry that is unwilling to change should not be an option.

Speaking of funding failing companies, I’ve seen news blurbs about financial companies, such as GMAC, wanting to convert to banks.  One thing that some of these companies have asked for is to be considered for part of the bailout package if they buy a struggling bank.  In case you missed that, let me repeat.  By buying a struggling bank or converting, certain financial companies want a piece of the bailout package.

Personally, if someone brought that proposal to me, I’d have them unceremoniously kicked out of the front door.  People are already leery about the bailout package in general.  Now these other companies want us to fund their poor investment choices or give them a handout because they want to become a bank?  If they want to buy a poorly leveraged company, that’s their choice.  But expecting US taxpayers to kick in is just wrong.

Frankly, just bringing that proposal to the table makes me leery of their business sense.  Also, if you’ve decided to apply to become a bank after TARP was announced, you should be automatically excluded from receiving those funds.  It’ll be interesting to see how all this plays out.

Categories: Bailout, TARP, Uncategorized