Banl Lending

  morddwyd 07:39 24 Jan 2011

"Bank lending deal for small businesses 'stalled'"

click here

Could somebody please explain why, if it so important to lend to small businesses, and it obviously is, the Government doesn't do the lending, and reap the rewards?

  morddwyd 07:40 24 Jan 2011

That title should be bank lending, of course.

  Forum Editor 08:08 24 Jan 2011

Lending money to commercial ventures is a risky business at the best of times, and most of us probably feel that our money can be put to better purposes.

We've already paid money to support banks that would otherwise have failed, and although that was the right course of action in the circumstances, the last thing we want to do is start lending money to small businesses.

The problem facing borrowers is that the banks are understandably cautious. Nevertheless, it's looking pretty certain that they'll come to an agreement with the government over lending policies, once they have an assurance that the government will soft-peddle a bit over the bonus issue.

  interzone55 08:48 24 Jan 2011

I think the banks are in something of a Catch-22 situation here.

On the one hand they're being told to lend more money to businesses, but the banks feel that many businesses are in a precarious situation and are having problems paying off existing debts.

On the other hand, the banks were lambasted for lending money to clients who couldn't pay them back.

I don't think there is an easy way out of this to be honest...

  morddwyd 09:22 24 Jan 2011

"The government isn't a bank."

Yet they were the ones who rushed in to bankroll the bankers.

"Lending money to commercial ventures is a risky business"

So why expect private business to take the risk if the Government is not prepared to?

Banks have already shown that they are, at present, not good at assessing risk.

"the job of banks is to lend money"

Here we go again.

It isn't.

The job of any business is to make money for its shareholders, nothing more, nothing less.

Everything else the business does is a means to that end, and that end alone.

That end is not served, as they have already shown, by making overly risky loans.

  interzone55 12:12 24 Jan 2011

"I can appreciate why the banks might not want to lend, but at the same time I cannot see why they would refuse to accept reductions in the bonuses paid.
It's the 'combination' of these two things that I find disturbing."

You're making the same mistake as everyone else and assuming all bank employees do the same job.

Essentially the banks are two businesses. There's the high street banks who lend to you & I, and to small businesses. Then there's the Merchant Banks who lend to big business and governments, and buy & sell shares, futures, small countries.
It's the merchant bankers that make the huge profits for the banks, and receive the huge bonuses...

  interzone55 14:19 24 Jan 2011

Sorry, they're not under the same roof.

It's like saying Jaguar employees shouldn't get a bonus because Land Rover made a loss. Same owners, different management teams...

  spuds 14:27 24 Jan 2011

I was once told by a very successful business person, that if you want a loan from a bank, go for bust, because the greed of the banks give them blinkered views.

That statement as been proved, by the near collapse of some major banking institutions. And dare I say, that it will happen again, because the banks are still taking blinkered views and judgments, and they still seem to be run on past decisions and likes, that they are invincible, and the customer isn't.

One thing that use to make me very annoyed, was how banks became 'preferences' at times of company or small business collapses. At the same time, the small supply company didn't stand a chance in regaining any owed money.

  jakimo 14:47 24 Jan 2011

Its generally excepted that Governments govern, and Banks lend money,but sometimes it may seem that the Banks are governing the Government.

Currently they are sticking to the Status Quo by lending to those who don't need it

  spuds 16:09 24 Jan 2011

I don't know about greengrocery, but didn't at least one bank try to expand into the motor trade, and failed miserably. And that was at times of success?.

  spuds 16:15 24 Jan 2011

And regarding preferred creditors, did or have the banks given the same to the taxpayers or their low interest rate investors. I doubt it very much.

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