Financial regulator havoc
In his State of the Union address President Obama bemoaned the "fact" that banks were not lending enough when the Fed and the Treasury had put everything in place for greater activity. His focus was on small businesses, credit cards, and home loans. After berating the banks for four years and blaming them for every regulatory failure and unexpected economic event, in his address he chose to single them out again, this time for not lending instead of lending too much.
Yesterday's Money and Investing section of the WSJ's lead story was "Lenders Are Warned on Risk". The focus was on leveraged loans to corporates, hedge funds, and private equity funds and whether banks were once again going too far in supporting leveraged credits. That is a subject certainly worthy of discussion, but we are not in heady times and consolidating poor performing firms with better firms or better management is not the stretch that it was in the last decade. Valuations have changed and opportunities exist. One could note that leveraged loans had almost nothing to do with the great recession except obviously in the home real estate and securitized real estate market. Still leveraged loans in general are worth regulatory attention even if, since their advent in the mid-1980's, they have performed, on average, acceptably or some would argue with merit better than that.
BUT HERE IS THE POINT OF THIS COMMENT. What is more of a leveraged loan than a 20% down home loan for 15 or 30 years in a market that has seen significant structural change? Home prices, as collateral, are in for years of volatility and the long term job contracts between employers and employees is for the most part a thing of the past. Temporary employee contracts without benefits or any guarantees are a big and growing part of our economy.
The same thought can be applied to small business loans. Communities are less stable than in previous decades and technology advances can turn a good idea into an outdated one in a very short time. Small business loans or small commercial real estate loans can require the borrower to put up all of their assets, including their home, as collateral. This is a disincentive to borrowers as well as an indication of the banks fear of regulatory challenges. If these are also not leveraged loans, what is.
This message is not lost on many smart individuals, small business owners, and community banks. The article may have been written about corporate leveraged buyout loans, but with the day in day out regulators who work on the ground, any kind of "leveraged" lending is thoroughly examined. Why would bankers become more accomodating under this kind of regulatory regime? The administration only seems to understand the big picture, or even care about anything but the big picture, the big political issue.
Seems to me that they need some education on what the financial world is really like today for individuals and small business owners.
Yesterday's Money and Investing section of the WSJ's lead story was "Lenders Are Warned on Risk". The focus was on leveraged loans to corporates, hedge funds, and private equity funds and whether banks were once again going too far in supporting leveraged credits. That is a subject certainly worthy of discussion, but we are not in heady times and consolidating poor performing firms with better firms or better management is not the stretch that it was in the last decade. Valuations have changed and opportunities exist. One could note that leveraged loans had almost nothing to do with the great recession except obviously in the home real estate and securitized real estate market. Still leveraged loans in general are worth regulatory attention even if, since their advent in the mid-1980's, they have performed, on average, acceptably or some would argue with merit better than that.
BUT HERE IS THE POINT OF THIS COMMENT. What is more of a leveraged loan than a 20% down home loan for 15 or 30 years in a market that has seen significant structural change? Home prices, as collateral, are in for years of volatility and the long term job contracts between employers and employees is for the most part a thing of the past. Temporary employee contracts without benefits or any guarantees are a big and growing part of our economy.
The same thought can be applied to small business loans. Communities are less stable than in previous decades and technology advances can turn a good idea into an outdated one in a very short time. Small business loans or small commercial real estate loans can require the borrower to put up all of their assets, including their home, as collateral. This is a disincentive to borrowers as well as an indication of the banks fear of regulatory challenges. If these are also not leveraged loans, what is.
This message is not lost on many smart individuals, small business owners, and community banks. The article may have been written about corporate leveraged buyout loans, but with the day in day out regulators who work on the ground, any kind of "leveraged" lending is thoroughly examined. Why would bankers become more accomodating under this kind of regulatory regime? The administration only seems to understand the big picture, or even care about anything but the big picture, the big political issue.
Seems to me that they need some education on what the financial world is really like today for individuals and small business owners.
posted by John Borden at 8:13 AM
2 Comments:
Obama simply refuses to understand finance. His resentment is fierce.
Obama has some good intentions, but no interest whatsoever in opinions that don't mirror his. He has mad little effort to build relationships on Capital Hill, even with many members of his own party, and he goes on the attack if some person of stature turns out to question some of his policies. He uses his Presidential powers to punish such individuals and it is not disguised. Despite some of his good intentions, Obama really has a repulsive and vindictive side to him, NO DOUBT.
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