On 2/26/2020 3:56 PM, wrote:
On Wed, 26 Feb 2020 09:43:56 -0500, "Mr. Luddite"
wrote:

On 2/26/2020 9:31 AM, wrote:
On Tue, 25 Feb 2020 18:45:50 -0500, wrote:

https://www.yahoo.com/entertainment/...001809503.html

===

Bloomberg continued, “But seriously. somebody’s gotta stand up and do
what we need. A healthy banking system that’s going to take risks
because that’s what creates the jobs for everybody. And nobody’s
willing to say that. The trouble is, these campaigns in this day and
age, really are about slogans and not about issues anymore."

And he's right of course, but not a popular message.


My limited experience with banks is that they do *not* take risks unless
they are forced to (by the feds) as in the sub-prime loans that led to
the economic collapse of home loans in 2008.

My experiences are limited, I recognize, but I've never seen a
bank take a *risk*, either in personal loans, mortgages or in
business. The loans are always backed by some form of
collateral.

Financial risk takers are private investors, venture capital firms, etc.

===

I think Bloomberg was talking about banks in a very general sense of
the word. Commercial banks do make loans without collateral but only
to trusted customers with a good credit history. They also make
things like construction loans which are collateralized by the asset
being built. Those loans are very tightly structured so that funds
are only released when certain milestones are reached. Another form
of finance is so called "Letters of Credit" which are sometimes used
in international trade to finance goods in transit. Funds are
released subject to satisfactory inspection of the incoming shipment.



Some companies in the business I was involved in use a bank to
finance receivables ... basically a revolving line of credit using the
company's receivables as collateral.

I never used a bank for anything other than accounts for payroll and
paying bills and vendors. Never had a bank loan or a line of credit.
All growth was organic, funded by retained, net profits (when there were
any).

Definitely goes against the grain of what is taught in business courses
and finance but it worked for me.