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The Independent Investor: Why Banks Won't Lend
Then we'd own those banks of marble, "Banks are made of Marble" by Pete Seeger |
Over the last few years, the Federal Reserve has practically given money away to any entity that calls itself a bank. Individual states are also trying, but so far the banks have just been hoarding this growing pile of cash instead of loaning it out. Why?
Two reasons come to mind: Banks are afraid of taking on lending risk. Burnt by the subprime mortgage debacle, they are now overly cautious on who they lend to in an economic recovery they are not sure is here to stay. Two, interest rates are at historical lows. If rates start to rise, loans made today could turn to losses fairly quickly.