Bank lending remains tepid due to policy decisions and regulations

by Laura Ehrenberg-Chesler on November 11, 2013

in Banks,Credit Crisis,Fed policy,interest rates

In spite of a continued record low interest rate environment, bank lending to consumers remains remarkably tepid. An excerpt from a recent article from CNBC gives this explanation: “…And that is when the Fed is not berating the banks for all sorts of their alleged misdeeds. That is unfortunate. At this point in the U.S. business cycle, a readily available and reasonably priced credit is crucially important because other determinants of household and business spending remain very weak. An unemployment rate of 7.3 percent, and the job insecurity it breeds, are serious impediments to consumer and business outlays. “That is the policy mix we now have, and the one likely to remain in place for some time because budget issues have become hostage to seemingly unbridgeable political differences that will drive Congressional mid-term elections next year and presidential elections in 2016. My guess is that the lingering uncertainties this will continue to generate will not be conducive to stronger consumption and investment spending. But don’t blame banks for that. They did not create these problems; policy makers did.” In addition to this uncertainty, we believe that the additional regulations imposed on banks by the new Dodd-Frank legislation, has made it more risky for the banks themselves to make many consumer and small business loans. As a result, you will notice the explosion of pawn shops, and payday loan offices around your city. This is not good for the individual or

the economy, and is one of the biggest contributing factors to the subpar recovery.

Leave a Comment

Previous post:

Next post: