When Banks hoard cash: Part 1

http://activerain.com/blogsview/716392/When-Banks-hoard-cash

The historic meeting of the 9 banking CEO’s came with a surprise for most of them. Taking a page from the Godfather, each of them was offered a deal they couldn’t refuse.

They were handed a one page document requesting their signature and agreement to sell bank shares to the government. It only took 3 ½ hours to convince all to sign.

Several CEO’s were not receptive to it but most were ready to sell for the capital injection (TAXPAYER MONEY) of $250 Billion. I’d like to have been a fly on that wall but I’d bet there was a lot of discussion. Then again, maybe I can't handle the truth.

LIBOR is the benchmark equivalent for banks as the Consumer Confidence Index is to Main Street. It is our gauge on how confident the banks are in us and each other. And LIBOR hasn’t been going too well with no bank willing to part cash to another bank unless they are buying it.

Banks have been hoarding cash during these difficult times although the Feds have done now just about everything they can. The capital injection and other moves made now puts the banking industry in a tough position. Lend or else.

Lend or else what? Well lend (the TAXPAYER’S MONEY) or don’t make any money because there are no substantial alternatives any more. Lend or suffer like the rest of us. Every financial sector is down (except for my multifamily investment market) with no place to go for profits except to Main Street.

The way the banks now see it is this. The old adage when you didn’t need the money, the banker was always around. When you did, he was nowhere to be found. This is a true adage. The people who need or want money in this financial environment are the ones banks feel are at most risk to default.

The average consumer who has decent credit simply doesn't want to or can't invest in a market like this although there seems to be great opportunities in many markets. Those with substantial assets aren't willing to take a chance as well and that includes your banks.

Get to know your local community banker well. Large banks will be much less willing to take a chance until this has faded off the headlines.

I think we will need a capital infusion as well. I don’t care if it comes from the Government (which I think it will) or the banks.

Someone fork over OUR cash.

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