And You Thought the Purpose of a Bank was to Make Loans?

[Donnachaidh]

http://www.huffingtonpost.com/charles-h-green/and-you-thought-the-purpo_b_414974.html


I'm no economist or banker, so I occasionally labor under the delusion that banks are supposed to lend money to credit-worthy people. Of course, they diluted the definition of "credit-worthy" a few years back. That ruined their liquidity. Then the Feds stepped in with the Troubled Asset Relief Program.

Silly me, I had also thought TARP was partly aimed at restoring banks' ability to lend money again.

Read the following (real) tale of woe from a qualified would-be borrower--let's call her Jane--and ask yourself why Wells Fargo would be so hesitant to lend.

For a clue, look to the end of Jane's tale.
---------

Jane's Tale: If I Can't Get a Mortgage, Who Can?

Last spring my sister and I decided to build an addition onto our vacation home in Northern Minnesota. Given today's economic climate, we knew it wouldn't be a cakewalk but we had no idea what a nightmare lay ahead.

Our family has owned lakefront property on Lake Superior since 1971. It's prime vacation area with large million-dollar+ homes built on either side. Our parents deeded us the property 20 years ago, mortgage already paid off. After our mother died last year, we decided to build an addition. We hired an architect and a contractor with a long and credible reputation and a crew ready for work.

We looked for a bank that would provide a construction loan for $250,000, for conversion to a mortgage when construction was completed. We went with Wells Fargo in Duluth. Their banker told us a loan was possible, but we'd need to open a business account first. My sister deposited $30,000.

More at the link ---

[ORDagnabbit]

1. the purpose of a bank is to fleece the poor. wanna know how money is created?

take a little bit of time and you'll know more about the banks then 99% of the people on the planet...

http://www.youtube.com/watch?v=A_ESB3VdpeE

[Poll_Blind]

5. Seconded. Worth watching if people haven't seen it.

:thumbsup:

PB

[SunnySong]

2. Rich person is treated as middle class...

Alert the media.....:crazy: :silly: :wtf: :spank: :grr: :beer: :nuke: :banghead: :rant: :hide: :popcorn: :rofl:

[CaliforniaPeggy]

3. Recommended.......even though it didn't show, for now...nt

[xchrom]

4. Recommend

[branders seine]

6. a production of Liberty Channel

affiliated with Liberty University . . .

[northzax]

7. there's a reason Wells Fargo doesn't want to loan money

it doesn't have any to loan. This particular case was complicated by the interstate nature of the transaction (loaning money in Minnesota for the use of someone in New York) but for all practical purposes the big boys are simply flat broke. Citi, BoA, Wells Fargo, PNC, JP Morgan Chase, HSBC, etc. they're all broke. They need cash, and you don't make a lot of money on a construction loan being converted to a residential mortgage, especially one for which there is no secondary market. you make the money on credit cards, short term loans and other often guaranteed loans like student loans. but loaning out $250k on a 30 year mortgage at 7% for a second home? they don't want to tie up that kind of capital in such deals. They can't say that, of course, so they just make it almost impossible. if you need cash flow desperately, would you loan your scarce capital at 7% over 30 years, or 20% short term?

if you need a capital loan, go to a smaller, healthier bank. the big guys are zombies, like in Japan in the 90s. an awful lot of local and regional banks have money to loan and are doing so.

[rpannier]

8. Thomas Jefferson on banks

Banking Establishments are more dangerous than standing armies