Banks Tighten Lending Standards by a Record as U.S. Economic Outlook Dims

[marmar]

Fed Says Banks Tighten Loan Standards Most on Record (Update2)

By Craig Torres

Nov. 3 (Bloomberg) -- A record share of U.S. banks made it harder for companies to get loans in the past three months, concerned about mounting losses from the economic slump and financial crisis, a Federal Reserve report showed today.

``Almost all domestic and foreign respondents pointed to a less favorable or more uncertain economic outlook as a reason for tightening their lending standards'' on commercial and industrial loans in the past three months, the Fed said today in its quarterly Senior Loan Officer Survey. ``Large fractions of domestic banks again reported tightening standards on both credit card and other consumer loans.''

Evidence of tougher loan standards may have prompted Fed officials to cut the benchmark interest rate to 1 percent last week. The deteriorating economy is ``playing a more prominent role in the tightening of credit terms,'' said Richmond Fed President Jeffrey Lacker in Jerusalem today.

The survey, conducted between Oct. 2 and Oct. 16, covers 55 domestic banks with combined assets of $6.2 trillion, along with 21 foreign institutions.

``The credit crisis reached up and grabbed the throat of the global economy and choked off economic growth,'' Dallas Fed Bank President Richard Fisher said in a Bloomberg Television interview. ..........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601068&sid=awp0v9iSJIlg&refer=home

[AdHocSolver]

1. Headline: Banks close barn doors after horses escape.

If they had tightened loan standards for the past eight years, they wouldn't be in the trouble they are now in.

Tightening loan standards now, when the economy is in trouble due to a lack of liquidity, is the opposite of what they should be doing. The tightening of loan standards is the CAUSE of the economy dropping even more.

The reason the banks gave for needing the bailouts was to provide them funds to loan out. So they took the money, essentially with no strings attached, and now they are refusing to give out loans.

Cutting the interest rate was part of the scam to enable the Ponzi scheme to succeed. The banks refuse to give loans irrespective of the interest rate. It is just an excuse to cover up the fact that the banks are profiting off of the depositors' money, without having to pay the depositors for the use of that money. This was the Fed's part of the scam to cheat the public.

The bailout was just another theft of the U.S. Treasury, no more and no less.

The economy tanking is part of the scam. Business drops so the executives have an excuse to fire most of the employees. This makes the profits increase even if the company's sales are down. Firing people is the fastest way to boost profits since the biggest variable cost, labor's wages and salaries, can drop dramatically, in a very short time.

The spurt in next quarter's profits due to firing people is immediate and dramatic. Investors see profits go up and buy the stock, which drives its price up, which encourages more buyers, and so on. The insiders still control the corporation and are all set to perpetrate another swindle.

To understand how the current deregulated economy works, you have to rid yourself of the fallacy that the interests of the executives running a corporation, and the welfare of that corporation, let alone the public interest, in any way coincide.

The best way to understand the relationship of corporate executives to the corporation they run is the same as the relationship of a leech to its host.