Bank Lending Reform

Tuesday, December 15, 2009

Coverage of banking reform continues with Greg David, former Crain’s New York Business editorial director – now director of the business and economics program at the CUNY Graduate School of Journalism.


Greg David

Comments [31]

Liquid Lunch from

I'd say I did a pretty sweet prediction (comment 3) of GD's argument!

Dec. 15 2009 02:55 PM
Calls'em As I Sees'em from Langley, VA

To adsf [20] - nice try.

I believe in reasonable regulation of almost everything and was against repeal of depression era banking regs; that said, Obama and the Democrat Congress cabal have no power under the Constitution to take over banks, the auto industry and the heath care industry, etc. It will all be held to be unconstitutional as was much of FDR's reforms.

There was no need to bail out the banks in the first place. The economy would be better now then it currently is. They should have taken their lumps and everyone involved in Fannie and Freddie fraud including the Dem pols who created them like Frank and Dodd should go to jail.

Dec. 15 2009 12:14 PM

sally -- let's hope one of his students puts your explanation in front of him.

Dec. 15 2009 11:42 AM
L from Manhattan

Bank bonuses? A distraction. On purpose?

The REAL SCANDAL is how money is so highly concentrated at the top. J.P. Morgan himself used "60 to 1" as the ratio for a well-run company -- the ratio of the top salary to the bottom. I used to work in banking and I remember discussions about the wild irresponsibility of the rising disparity when it was only 130 to 1. Now it is common to be 300 or 400 to 1.

With a little research you can go back into the 1990s to find articles about how corporate boards were inflating executive compensation packages -- board members having the favor returned by outside board members at their own corporations.

Please do more on the subject of how and why real wages for the rest of us have fallen over the last 30 years.

Dec. 15 2009 11:42 AM
Sally Swisher from Upper West Side

It's now too late, but Greg's statement that banks make money by lending money may have been true before Glass-Steagall was repealed, but I bet it isn't true any more. I would like to have asked him about that. Now, retail community banks are allowed to take depositors' money and use it for financial speculation & complicated investment schemes with higher profit margins than consumer & small business loans. Risks (in other words - loans that have been made to people) could be sold off to suckers in the market - so that the bank lost nothing if the loan defaulted. Once everyone started to default, the entire economy crashed, which threatened the banks. So it was only when the risk came home to them that it made any difference. Now that there is so much more scrutiny & it's harder to spread the risk, why would a bank want to lend to small business, in order to get the small profit margin from those loans, rather than playing in the market for higher returns? If we restored Glass-Steagall, they would have to go back to the old fashioned practice of retail banking, which does make its money from the interest gained from loans.

Dec. 15 2009 11:38 AM
mozo from nyc

The bottom line is that starting with the Clinton admin and then encouraged by Bush 43 the govt deregulated the financial sector. This has led to one of worst economic downturns in the history of the US. Period. So much for free markets. Stop blaming the borrowers for accepting what turned out to be financial crack pushed by the banks.

Dec. 15 2009 11:34 AM

Banks managed to acquire billions in the last 4 quarters. Their job, unless I'm missing something, is to acquire billions. For once they actually deserve their bonuses.

That banks made their massive profits by begging, and tricking puffed up thought leaders such as our spunky guest here is entirely beside the point.

Dec. 15 2009 11:31 AM

"The banks should not be concerned with social responsibility."

I don't agree with that, but let's assume it's right. Shouldn't there be an exception during this period when the banks have been bailed out through government welfare?

No one is asking the banks to lend recklessly, but it's not unreasonable to ask them to lend to qualified small businesses at fair returns. It may reduce the banks profits over the short term, but they have benefited from OUR money. Because of this, they SHOULD be concerned with social responsibility, at least over the short term.

Dec. 15 2009 11:28 AM
z.m. from brooklyn

My dad ran a community bank when I was growing up. I've always banked with community banks, and been happy with the services (online banking, etc) provided. Community banks are less like to add sneaky fees... and you get better, more personal service with a community back.

Dec. 15 2009 11:27 AM

yes, thank you john/18. Craig?

Dec. 15 2009 11:26 AM
Robert from NYC

I hate when people say that's just the way it is when it was made to be that way probably by people like the questioner and that's how they want it. But fact is "it" can be changed from being the way it is as it was from being the way it was. Most "its" can be changed.

Dec. 15 2009 11:26 AM

8/calls em --

You DO realize that you are criticizing obama for NOT implementing regulation, right? Are you admitting you're a COMMIE? *gasp*

Dec. 15 2009 11:26 AM

Small bank are BETTER than big banks. You get personal service from them, which makes ALL the difference.

Dec. 15 2009 11:26 AM
Jon from NYC

Out of curiosity, please ask how much are banks making on loans v. how much they're making in fees.

Dec. 15 2009 11:25 AM
Dubai Boy from London - NYC

u yankie doodles need to stop WORSHIPING banks. read and listen to wot u SAY. ur praising "their" bonuses and you GIVE all ur CASH to consumer banks. ut BLOODY stoopid. and unfortunately many other "captialist" countries have follow'd u off the bridge. > go MAKE real money. STOP borrowing .. u have NOTHING. what r u going 2 do?

Dec. 15 2009 11:24 AM
Robert from NYC

this guy is really causing me nausea. he's such a schmuck free market slob.

Dec. 15 2009 11:24 AM
Alex from Brooklyn

Banks make money by TRADING.. not lending, they lend themselves to allow thier trading desks to trade...

This guest is clueless

Dec. 15 2009 11:23 AM
Rob from The Bronx

Mr. David is blowing smoke. The banks overextended making imprudent loans and now the pendulum is swinging too far in the other direction. There are so many stories of small businesses that have a good payment history and are now having their loans called or rates reset without any hint that they were about to default. The bankers are simply covering themselves, they have no skin in the game and don't get it why people are so angry at them and their outrageous bonuses.

Dec. 15 2009 11:22 AM

Also re small business lending- Greg underlined a good, fundamental point- banks and such financial institutions exist to lend money and profit from lending money. Though they're getting rep that they're not lending- banks in fact continue to lend, though originations compared to last year are slightly less.
But with the need for provisions for loan loss and the rate of failures of small businesses etc. - have you compared the "costs/ losses" from small business lending to that of the losses from TARP or bolstering the positions/ couping losses from the impact of derivatives etc.?
Why are we focusing on the possible losses from loans to "main street" vs. "wall street"?

Dec. 15 2009 11:21 AM
mozo from nyc

Like Pontius Pilate, the banks wash their hands of it all.

Dec. 15 2009 11:20 AM
Alex from Brooklyn

If the bad banks had failed,

would there not be other banks lined up to take over for them?

Dec. 15 2009 11:20 AM
Marna Garwood from Brooklyn

I've heard in the last couple of days on NPR that in fact banks don't want to make loans because they make more money trading because of the very low interest rates.

Dec. 15 2009 11:19 AM
Bob from Brooklyn

I find Mr. David's assumption that banks' fundamental business is lending. Hasn't an increasing percentage of their revenue come from fees and proprietary trading?

Dec. 15 2009 11:18 AM
Calls'em As I Sees'em from Langley, VA

The Obama admin has loaned money to the banks at 0% and expected them to loan it out. They didn't. They keep it in their electronic vaults. Now, he wants to force them to help him and low and behold, they are racing to pay him back with taxpayer money. This was all foreseeable, except by Dems with a radical socialist agenda.

Capitalism won't go done so easily. Unfortunately it is the vast middle and upper middle class that will pay all the bills and for all the mistakes. This is one of the many reasons why Obama is way down to 44% in the polls and even more in some specific issue polls.

Dec. 15 2009 11:17 AM
superf88 from

David: "Banks want to make loans -- that's how they make there money!"

No wonder Crain's got rid of him -- The rest of us have learned over the last decade that banks make money by begging, to Congress and Obama's pretentious Harvard geniuses, Kissingers all.

That and hidden fees have turned banks into the mints that they admittedly are.

Dec. 15 2009 11:17 AM

Thanks Brian. Per Greg's comment about lending not being an act of social responsibility but that of doing business- I understand his point but I don't believe the two are independent of one another. If investors and the profitability modeling of certain financial products weren't rent seeking but actually were vested in promoting wealth- wouldn't that change the current state of the economy?

Dec. 15 2009 11:16 AM
Tom from UWS

Wouldn't the banks improve their capital holdings by offering reasonable interest on savings? The sub-1% rates of today do not encourage savings deposits. Comparing that to their credit card rates ... YIPES.

Dec. 15 2009 11:13 AM
Alex from Brooklyn

CORRECTION to our RIGHTY non conspirasist

Banks borrow at 0% lend at 6+% going to over 30% on credit cards, plus all kinds of invetive fees.

Citibank proves that we have capitalism for thier profits and socializm for their loses.

Dec. 15 2009 10:11 AM
Liquid Lunch

Yea, I've read GD's handiwork. Banks make their money by borrowing at 5 and lending at 7: Period. You lefty conspiracy theorists need to get edumicated. As you can see, Citibank is the latest proof that capitalism really does work.

Dec. 15 2009 09:33 AM
Gabrielle from Brooklyn

I'm partially playing devil's advocate but I'm curious as to why should we go back to lending to people who might not be able to pay the money back and why should we increase our output when our way of life was presumably unsustainable?

Dec. 15 2009 08:50 AM
Joe Spazee from brooklyn

Obama begging for Banker's "support" the other day, that was kind of funny. Is that a new form of reform?

What does he expect them to do? Go back and say lets not make money guys, let's give it away, hop to it everyone.


the time for reform has come and gone, now is time for politial showmanship, Obama point in hand.

Dec. 15 2009 08:13 AM

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