Home Viewpoints Finance Banks need to shed the fat before the next lending feast can begin Thursday, 20 November 2008
             
Banks need to shed the fat before the next lending feast can begin PDF Print E-mail
Thursday, 01 May 2008 11:30
Banks have been working diligently to rid themselves of the lending commitments that  helped to take down Bear Stearns. It"s not only the mortgage-backed securities and CDOs that everyone"s been talking about. Low-rated, high-risk, debt sitting on the balance sheets of many of the top banks is holding back any new motivation for new lending. It"s gotten so bad that banks are willingly taking a loss on these loans just to get themselves clear of the whole mess.

From Citibank to Goldman to Deutsche Bank, no one is exempt. Banks are not only selling off loans with junk ratings at almost half-price, but are offering below-cost financing terms to anyone who will buy them. To put that into perspective, that"s like someone selling you their home for less than what it"s worth (on paper) and lending you the money to buy it at interest rates lower than what you could get elsewhere. Sure, if someone wants to get rid of something that badly, then it can"t be all-good, but rest assured that some of these risk-loving buyers are going to win big when things finally do settle.

Cut your losses. It"s a saying that every investor knows (or should know). Banks are well known for their ability to make money in any market and their ability to weather almost anything (obviously with some exceptional exceptions). They do so by knowing when to get out of a bad situation. There"s a lesson in there, I"m sure... 
Comments
Discuss Viewpoint
Title: (optional)
[b] [i] [u] [url] [quote] [code] [img] 
 
Receive update notifications?

3.23 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."
 

MBAA Poll

Via the Interest Rate, what can the Federal Reserve Affect?
 

Quotes

What is it that you like doing? If you don't like it, get out of it, because you'll be lousy at it. You don't have to stay with a job for the rest of your life, because if you don't like it you'll never be successful in it. - Lee Iacocca

Visit Sponsors

Your are currently browsing this site with Internet Explorer 6 (IE6).

Your current web browser must be updated to version 7 of Internet Explorer (IE7) to take advantage of all of template's capabilities.

Why should I upgrade to Internet Explorer 7? Microsoft has redesigned Internet Explorer from the ground up, with better security, new capabilities, and a whole new interface. Many changes resulted from the feedback of millions of users who tested prerelease versions of the new browser. The most compelling reason to upgrade is the improved security. The Internet of today is not the Internet of five years ago. There are dangers that simply didn't exist back in 2001, when Internet Explorer 6 was released to the world. Internet Explorer 7 makes surfing the web fundamentally safer by offering greater protection against viruses, spyware, and other online risks.

Get free downloads for Internet Explorer 7, including recommended updates as they become available. To download Internet Explorer 7 in the language of your choice, please visit the Internet Explorer 7 worldwide page.