Thursday, February 4, 2010

Show Me The Money

Tea Partiers have arrived in Nashville for three days of hollering about government spending, which I find amusing. Just curious, folks: if the government doesn’t spend money at this moment in our economic crisis, who do you think will? Because near as I can figure, everyone else has hit their miser button. People are not spending money on anything, and neither are those institutions which pre-meltdown were the engines of our economy.

Let me explain. Mr. Beale and I have gone a few rounds with the bank recently as we try to complete a re-fi on the house. We started this process, I kid you not, back in August. I’ve owned two houses in my day, refinanced both, so this is my fifth turn around the home mortgage block and I’ve never been asked to jump through so many hoops or had so many bars moved on me before. We are not happy.

Keep in mind: I have excellent credit, no debt, and my house is still worth considerably more than what I’m asking from the bank. In other words, I’m among the least risky customers this major lending institution will see walk through its doors. Yet they are treating me like a low-life criminal. In fact, they are asking so many bizarre questions that I now suspect they are simply fishing for a reason to say no.

In short: if banks won’t give me a loan, they won’t give anyone a loan. They are holding onto their money with both hands, and they won’t cough up one dime.

And it gets worse. I’ve heard from business people in our community that they cannot get loans, either. And if a business can’t get a loan, then what will drive our economic recovery?

Yes, to a certain extent this re-settling has been long overdue. As a nation, we’ve floated on a sea of debt and promises for far too long, and it was bound to catch up with us. But I do think, as President Obama himself pointed out, that the pendulum has swung too far the other way. It’s probably good that people are saving their money, that businesses are being challenged to use more real capital to finance whatever they want to do, that banks aren’t handing out loans to people who declared bankruptcy in the past 90 days. But by refusing to make even reasonable loans, it’s leading to unemployment and prolonging the economic collapse. Unemployed people do not spend money.

So who is at fault here? What the heck is going on? The banks are blaming the government, and the government is blaming the banks. And I have no clue which party is lying here, except to say in my own dealings with my own bank, they've behaved like huge dicks. I'm sure there is plenty of blame to spread around.

A prominent person in our local real estate world has said there is a new government rule limiting how vested a bank can be in one area of the economy when it comes to making business loans. So, for example, there’s a limit to how many real estate development loans a bank can make in one city, and because Nashville was such a real estate boom town, local banks are maxed out in this business sector. As a result, he says, he can’t get a loan for any development projects.

Now, let me say, that sounds like bullshit to me. But what do I know? Has anyone else heard that?

I bring that up because the Administration wants to funnel $30 billion worth of TARP funds to small community banks so they can make loans to small businesses. Problem is, the community banks don’t seem to want the money. They say they don’t need it and even if they did, there are too many “onerous restrictions" on the money to make it attractive. ABC News reported:
To entice community bankers to use TARP funds, says Mr. Merski, Congress would have to change restrictions on dividend payments, a provision that gives the government partial ownership in the recipient banks, and the cap on executive compensation.

"The key is to remove all those onerous restrictions," says Merski, who doubts Congress would agree to do so. "On top of that, the cost of the TARP funding is extremely expensive, so they would have to change all these rules and restrictions to make it viable."

Merski represents the Independent Community Bankers of America. I just want to call bullshit, bullshit, bullshit all over the place. What the hell? Can we get a straight answer here? I don’t think taxpayers want to see TARP funds used for executive bonuses and political contributions. That’s not onerous, it’s common sense. We don’t want to see TARP funds going to Dubai. That’s not an onerous restriction either.

Neither is paying interest, though that depends on how much interest has been charged. How about one percent? I’ll take one percent.

I’m just not getting what the complaints are about.

Our economy needs money, and the banks don’t seem to want to give it out. And let me add, if we hand over TARP funds to a community bank, what makes anyone think they will make the loans? The major institutions sure haven’t.

I’m getting pissed off here. And I’m not the only one. I’m sure we’ve all heard of the Move Your Money campaign. The movement is spreading: in New Mexico, two state legislators have proposed moving the state's $1.8 billion away from Bank of America to community banks. Ouch. Memo to BofA: keep pissing people off and you might find yourself small enough to fail.

But is there reason to think a community bank will behave any less dickish than a big national institution? Sounds like we’re hearing the same whining from the community banks that we heard from BofA.

In Oregon, gubernatorial candidate Bill Bradbury has suggested forming a state bank. His Bank of Oregon idea is very intriguing:

Under the proposal, all state government agencies would be required to deposit their funds in the bank. The lender would then invest the funds within the state, with the investments serving as an economic development tool. It would also attempt to turn a profit, like a typical commercial bank.

I like this idea. If the banks are saying the government is putting too many restrictions on them, then screw it. Let the government start its own bank to make loans.

Sound socialist? Meh. It’s worked for North Dakota for nearly 100 years.

Anyway, this post has rambled on long enough. But I'd really like to hear some ideas on how we move through this. Anyone?