More Community Reinvestment

As though forcing banks to loan to bad risks had worked before:

The Obama administration’s chief steward over small-business policy visited Colorado on Thursday, in part to deliver a message that the state’s banks need to do more to extend emergency stimulus aid to struggling businesses.

In remarks to The Denver Post before a speech to the U.S. Hispanic Chamber of Commerce, Small Business Administration head Karen Mills said her staff has ramped up efforts here to promote America’s Recovery Capital loans. Banks make the $35,000 loans while the SBA guarantees them at 100 percent.

Mills met with Gov. Bill Ritter, who is trying to promote the program, and Don Childears, head of the Colorado Bankers Association, who has criticized ARC lending as unprofitable for banks unless they take on large volumes.

Of course, it’s not the banks who are on the hook here.  It’s you.  I’m sure that not all of these businesses are bad risks.  Most probably aren’t.  But enough probably are to poison the whole pool if banks are expected to loan en masse, and the government doesn’t exactly have a sterling record in distinguishing between the two

We’re not in the business of promoting panic here, but it’s not as though the banking and mortgage systems have exactly been put on sound footing.  The Congress – notably that savant Carl Levin – is encouraging the FDIC to borrow from the Treasury (who will borrow from the Fed, who will either print the money or borrow it from the Chinese or take it from the banks in question, anyway), at the same time that the FHA is tightening lending standards after discovering that the subprime business may be riskier than we thought.  Horse, meet barn door.

  1. No comments yet.

You must be logged in to post a comment.

  1. No trackbacks yet.