Banks continue to cut lending

No matter how much liquidity the Fed and Treasury pump into the system, they can't seem to get the banks to lend.

(MarketWatch) -- U.S. banks are reducing their lending at the fastest rate on record, tightening the credit squeeze and threatening to leave many otherwise viable businesses unable to borrow money to expand their businesses, meet their payroll or refinance their maturing debts.
According to weekly figures provided by the Federal Reserve, total loans at commercial banks have fallen at a 19% annual rate over the past three months, while loans to businesses have dropped at a 28% annualized pace.

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In the credit-based economy we have (as opposed to an economy based around producing things), a tightening of credit is destined to choke off any possible recovery.

In the first and second quarters, the U.S. private sector consumed more capital than it raised for the first time in more than 60 years. Negative net investment is "the hallmark of depression and difficult to reverse," said economist Leigh Skene of Lombard Street Research.
The big drop in credit also shows up as slower money growth. In the past 13 weeks, the money supply has fallen 0.3%. Most new money is created by borrowing, as banks credit the borrower's account with the proceeds of a loan. Conversely, the money supply is reduced when debts are paid off or written off. Deflation is not a threat -- it's already here.

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makes the entire TARP/TBTF thing

a lie and a joke.

Me, I'm just thrilled that I could tell Chase to stick it and finally got rid of everything I had with WaMu which was transferred to Chase. They took away of course the free FICO monitoring that came with WaMu credit card.

I celebrated with a frugal pizza. I just "deleveraged" because I could but I feel very sorry for those who are stuck having to live off of loans and credit/debt because they are getting it from both ends right now.

And foreclosures continue.

We never resolved the root cause of the problem - toxic loans. Toxic stuff is still on the books. Unless, of course, PPIF purchases toxic stuff at a huge premium. - Financial Information for the Rest of Us.

We need debt forgiveness.

We are well beyond a "moral hazard" problem re: borrowers. Eliminate the negative equity problem with system-wide debt forgiveness.

Forget these weak-ass loan modification programs. They are not working because loan servicers don't want them to work. It's well past time to dole out some pain in the financial sector. - Financial Information for the Rest of Us.


I image banks have to use all the FED and TARP money to back up all the losses their polices accrued.