Saturday Night Credit……
Tightening Credit….
This report in the Wall Street Journal says a couple of things to me:
- Banks are tightening up credit on investment grade companies because they are concerned about having enough capital to last through this mess.
- Banks are concerned about the economic conditions and whether the companies that they loan money to will be in good condition in a year.
Either way, it kind of blows a hole in the “start of the recovery” theory, doesn’t it?
Tom Vanderwell
Calculated Risk: WSJ: Banks Tighten Corporate Credit Lines
Banks are shortening the terms on lines of credit … They are charging significantly higher fees for the lines of credit, known as revolvers. And instead of promising an interest rate determined mainly by the company’s credit rating, banks will now charge more if the cost of insuring the company’s debt against default is higher.
…
About 72% of the revolving credit facilities obtained by investment-grade companies in the first quarter of 2009 had 364-day maturities, or tenors, and no companies received five-year lines … In the same period a year ago, 30% of the facilities were for 364 days and 41% had five-year maturities.
Quote of the Day
by Tom on February 6, 2009
in Market Musings
“Credit is a system whereby a person who can’t pay gets another person who can’t pay to guarantee that he can pay.” – Charles Dickens
I’ve now seen this quote from Charles Dickens in many places. What do you think? Is it accurate?
Tom Vanderwell
This credit crisis isn’t depressing everybody – The Bradosphere – Jackson Citizen Patriot – MLive.com
by Tom on October 13, 2008
in Market Musings, banks
Point me in the direction of that credit crunch everyone says is causing the worst financial crisis since the Great Depression.
It must be hiding behind a tree or something, because I can’t see it
Interesting take on things, especially because it talks about “my” bank……
Tom
P.S. My point and my contention is that if you have good credit, aren’t flat out broke, you can still get credit in a reasonable amount…….
Confessions of a Banker
by Tom on September 30, 2008
in Market Musings, banks
I just got off the phone with a friend of mine (yes, I do have friends). He was calling to clear up some things that he heard on the radio. I’m going to attempt to layout his questions and then answer them:
Tim: Hey Tom, is it true that banks have stopped lending money to anyone?
Tom: Nope, that’s not true. Have restrictions tightened on all sorts of lending? Yes it has. Is it harder to get a mortgage than it was 6 months ago? Yes it is. Is it harder to get a car loan than it was 6 months ago? Yes. Can well qualified borrowers still get it done? Yep. What about business lending? That has been restricted more than lending to individuals has.
Tim: So, when the “talking heads” tell us that credit has totally frozen up, they are exaggerating things?
Tom: Yep.
Tim: Doesn’t it strike you that the way guidelines are now is the way they should have been to avoid a LOT of these problems?
Tom: Yep.
Tim: So, what was your opinion of the bailout?
Tom: The banking system has become bloated and full of too many people pursuing unreasonable returns. If Washington Mutual and Wachovia could be “shut down and taken over” by a joint private money (JP Morgan and Citibank) and FDIC and it could go very smoothly, don’t you think we already have the mechanisms in place to handle the crisis? Let’s face it, not only are there too many homes out there (part of the problem) but there are also too many bankers. Until we adjust both of those down to sustainable levels, we’re going to continue to have problems. The quicker we adjust those, the more quickly we can begin rebuilding.
As a friend of mine, Jeff Brown, a Realtor in SanDiego, says, “Lenders Lend.” That’s what we do. Are the rules changing? Yep, but we’re still here, the doors are still open and the RIGHT kind of loans are still getting done.
So, there’s my confession, the world isn’t coming to an end and I’m still writing loans.
Oh, one other thought – I think it’s actually a really cool thing that the people in Congress actually listened to their constitutents! What a wonderful example of democracy in action. But don’t think the issue is totally dead yet, so call them again!
Good credit, bad loans – Apr. 28, 2008
by Tom on April 28, 2008
in Uncategorized
Good credit, bad loans – Apr. 28, 2008
Another story about a borrower who:
1. Didn’t understand the loan they were getting.
2. Couldn’t really afford the house they bought.
3. Felt pressure from “people” (Realtor? Lender?) to get this type of loan.
She was able to make it through, many aren’t so lucky.
If you don’t understand the loan terms, or you feel that someone is pressuring you, you need to back off, take a second look at things and make sure that you’re doing the right thing.
