Nov 25, 2009 11:33 am


You wish to know why there is no job creation in the private sector? Why only the jobs of government employees are safe? The answer is simple, explains GEORGE MELLOAN, banks are told not to"risk" lending to private borrowers, especially to job creating small businesses. Now, the more they lend to government, the higher their salaries. In other words, we are dealing with a perfect job and Capitalist economy killer. Lenin would have been proud.

Economist David Malpass detailed the squeeze on lending to small business in a recent post on his Encima Global blog. He noted that a member survey by the National Federation of Independent Businesses in May found that 16% of respondents were reporting loans hard to get, the worst reading since the 1980-82 recession. The Federation's October report showed only a small improvement. Mr. Malpass predicted further tightness through the third and fourth quarters.

Washington hasn't been able to milk the taxpayers sufficiently to finance its massive deficit. The Chinese are getting skittish as well. So tapping bank deposits is yet another avenue to a big pot of cash. As for the bankers, they've been awarded an easy life. Thanks to the Fed's zero interest-rate policy, they can make a decent profit on"safe" Treasury and agency securities yielding 3% or more. The too-big-to-fail banks like Citi and Bank of America can draw on their big shareholder, the U.S. Treasury, if their capital needs further supplements. Bankers don't have to worry about making risk judgments because they've been ordered to not take risks. So maybe the Fed is justified in cutting their salaries, since whatever banking skills they had—meaning the ability to assess risk—are no longer needed or wanted. An office boy could buy government bonds. . . .

Yes, things have changed in a year. Feeding the government and starving free enterprise looks like a prescription for long-term economic stagnation. It's not unlike what we witnessed in the depression of the 1930s.

Read the whole scary thing and pray for the most vulnerable amongst us for they are sure to pay the highest price.

Also see, Lending declines as Bank Jitters Persist

"There is no question that credit availability is an important issue for the economic recovery," FDIC Chairman Sheila Bair told reporters Tuesday."We need to see banks making more loans to their business customers."

She said large banks -- which account for 56% of industry assets and received a large share of the government's bailout funds -- accounted for 75% of the decline.

James Chessen, chief economist at the American Bankers Association, an industry trade group, said,"It's a very risky time for any lender because the probability of loss is greater, and they are being prudent in their approach to lending. Their regulators are demanding it."

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