FDIC boss: Big banks still aren't lending enough

The head of the Federal Deposit Insurance Corp. said Tuesday she's "very worried" that the nation's biggest banks aren't lending enough and warned the economy could take another turn for the worse without increased access to credit.

FDIC Chairman Sheila Bair said the FDIC's upcoming quarterly report would show that "not many large institutions are doing a very good job of lending." Instead, she said, some are taking advantage of near-zero interest rates by borrowing dollars cheaply to buy higher-yielding assets like stocks or commodities — a move known as the "carry trade."

"I don't see much money going out (from banks). I see a lot of carry trade," Bair told a banking conference in New York. "It used to be you take deposits and you lend out money. We'd like to see more of that."

Many banks have tightened lending standards following a wave of residential and commercial property defaults. Others say they want to lend but see little demand as consumers and businesses seek to pay off debt, not take on more.

The lack of lending by large banks is dangerous at a time when many small and midsize banks are teetering on the brink amid the economic downturn, Bair said.

"I'm very worried (that) the larger institutions don't seem like they're stepping up to the plate providing credit," Bair said. "Because if they don't do that, we're all in the soup."

Addressing the rash of bank failures, Bair said the FDIC had enough funds to shut down troubled banks and would tap its line of credit with the Treasury only as a last resort. There have been 120 bank failures this year, and Bair predicted "many more" ahead.

To read the original article click here

Other articles of interest...
Wall Street Faces ‘Live Ammo’ as Congress Aims to Unravel Banks
Seven Wall Street lobbyists trooped to Capitol Hill on Nov. 9, hoping to convince Representative Paul Kanjorski’s staff that his plan to dismantle large financial firms was a bad idea.
World markets subdued as S&P heads for 1,100
European stock markets rose modestly Thursday as investor optimism was dented by a subdued performance in Asia. Wall Street was expected to retreat after the Standard & Poor's 500 index failed to close above 1,100 the day before.
Affordable Prices Draw Investors to Real Estate
Nearly Half of Foreclosure Buyers Seek Investment Property
Ireland’s EU54 Billion Gamble on Banks, Property Nears Approval
The biggest financial gamble in modern Irish history is about to exit the realms of theory and enter the real world.