| dalakhani |
01-01-2010 09:15 PM |
Quote:
Originally Posted by Cannon Shell
It is Bush's or Mike Leach's fault.
|
The small banks have the chips stacked against in a massive way. Before you even start, overhead is bigger simply because of scale. The only way a small bank stays in business is by doing the business the big banks don't want to do. The more stable clients want higher yields on their deposits and dirt rates on their loans so the spreads are thin. The riskier deals...the ones where you can actually make a profitable spread...are deemed risky for a reason. Maybe its a commercial loan for a new office building going up or maybe its a small business loan. Either way, the small bank is really the only game in town.
A bank has to maintain a certain ratio of deposits to outstanding loans. With the hysteria, people are moving their money out of the small banks and into the "safer" bigger banks and, lets face it, some of these loans are going bad. Add it all up and it equals an insolvent bank. Its not like the small bank took these loans or are taking them currently with greed in mind. Its simply survival.
Its a mess...and its only going to get worse. It isnt bush's fault or Mike Leach's fault and it certainly isnt Obama's fault right now. I read all of these posts in this section about inflation and I just have to laugh. When loans default and businesses go down and banks aren't lending, wouldnt that set up for a deflationary environment? |
