"Dave" wrote in message
...
On Wed, 11 Feb 2009 10:30:00 -0800, "Capt. JG"
said:


Banks don't want to make loans... to anyone. This is a huge part of the
problem.

I deal with banks and banking regulators all day long, Jon. That's simply
untrue.

A major problem is fear on the part of both the regulators and the
regulated. The banking regulators are deathly afraid that if they let
banks
make too many loans in relation to their capital base, and the banks later
go south, the regulators will be criticized. So they pressure banks to
write
down the value of their existing loans. That hits the bank's regulatory
capital, reducing the amount of new money the banks can legally lend.

The bankers are afraid the regulators are going to require them to write
down their existing loans further. If that happens, and the banks have
been
lending more money, they will be out of compliance with regulatory capital
requirements, subjecting the banks to regulatory orders, limits on their
activities, and perhaps even monetary penalties on the directors and
management. So the bankers reduce the amount of loans they are making to
create a cushion in case the regulators go crazy.

The underlying problem is that nobody really knows what the value of
existing outstanding loans really is.


So, as you said, "bankers reduce the amount of loans they are making...."
And, as I said, they don't want to make loans.

--
"j" ganz @@
www.sailnow.com