Banks need to wake up and smell the money

Real Estate Agent with EXIT Realty Leaders


By now you've heard the news. Two days after the Senate approved The Rescue Bill, it was approved by the house and signed into Law by President Bush on Friday.   Is this going to be the magic pill for our economic crisis? That is the trillion dollar question.  

Last week I had a client with Excellent Credit, approved for a home loan, another client with serious issues with their credit, was denied a loan.  Lending as it should be.  There are banks out there that have money and they are not lending to anyone.  Week before last, the Fed made $20 Billion available to Banks.  The Fed was created in 1913 by J Pierpont Morgan.  Morgan created the Federal Reserve to provide money when it was needed to avoid financial panic or depression.  The reason the Depression in the 30's happened is because the Fed refused to bail the banks out.  We know how that turned out.  The Federal Reserve announced on October 2nd, before the historic vote, that is had made $120 Billion in new money available the prior week.  During that same week, banks were supposedly turning down up to 90% of all new loan applications, when those same banks had $140,000,000,000. available to them from the Fed.  Ben Bernanke has tremendous power when it comes to how he deals with banks that do not lend,  when money is available to them for credible borrowers.  Banks that are refusing to lend to credible borrowers are playing a dangerous game with Bernanke and the Fed.  

The 12 Regional Federal Reserve Banks are Private Banks, not Government as many think.  The Fed has a lot of leeway and they know how to use it.  The Federal Reserve can if  deemed necessary for public good, lend directly to businesses or individuals.   Banks are not mutual funds or hedge funds, they are suppose to take in deposits and make loans, to credible borrowers.  If the Fed determines a bank is not doing that, they can suspend that banks license.  They can seize that bank, take it over, write off their bad debt and operate them as a Federal bank short term.  Now more than before banks need to wake up and do business with credible borrowers.   When this happens that is when you will see the housing industry turn around in our area and around the country.  We have people everyday moving into our area for Progress Energy, people moving from the north to Sunny Florida, job transfers with other companies, etc.  Many of those people need loans to buy homes.  When we seek lending flowing to credible borrowers we will see the turn around start to happen.

Comments (2)

Lewis Beynon
CENTURY 21 Triangle Group - Raleigh, NC
Lew B Realty

Nice Blog, thanks Nancy!!!

Oct 06, 2008 05:32 AM
Nancy Little Lewis
EXIT Realty Leaders - Inglis, FL

Thank you.

Oct 10, 2008 12:38 AM