“Make more loans?” Mr. Hope said. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”
The article arrives at the discovery that "many banks that have received bailout
money so far are reluctant to lend, worrying that if new loans go bad, they will
be in worse shape if the economy deteriorates."
This could not be further from the truth! In fact, there are many, many creditworthy loan requests being turned away from the majority of banks that have exceptional debt coverage, low leverage, and splendid sales and credit trends.
The real reason they are denying great loans is that they have other uses for the money:
"A review of investor presentations and conference calls by executives of some two dozen banks around the country found that few cited lending as a priority. An overwhelming majority saw the bailout program as a no-strings-attached windfall that could be used to pay down debt, acquire other businesses or invest for the future."
One honest person stated:
"Mark Fitzgibbon, research director at Sandler O’Neill & Partners, which sponsored the Palm Beach conference, said banks seemed to be allocating the bailout money for four general purposes: increased lending, absorbing losses, bolstering capital and opportunistic acquisitions.” He said those approaches made sense from a business perspective, even though they might not conform to popular expectations that the money would be immediately lent to consumers.
Clearly the economy is stressing the creditworthiness of business borrowers, but not one lender can give any of us professional commercial mortgage people - in any firm - any clear indication of what they will lend on if presented to them.
We have asked for even the most conservative guidelines, but not one bank is willing to commit verbally or in writing to a guideline that they will fund. Presently, it is catch-as-catch can with loan presentations.
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