EDITOR’S NOTE: Getting the Banks to Lend

By Keat Foong, Executive EditorYou can bring a horse to water but you cannot make it drink. That appears to be the situation with regards to banks that are in the $700 billion program to receive capital injections from the federal government. There are discussions in the press about banks’ planning to hoard the cash, for acquisitions or other opportunities down the road, rather than make more loans. And there is the implication that the banks, shockingly, may even be continuing to reduce their volumes of lending irrespective of the cash injection.  That is not welcome news. Banks need to be making at least more loans to try to help support the, dare we say, “sinking,” economy. And, in the first place, was not the reason for the $700 billion financial rescue package to get the banks lending again and to unfreeze the credit markets? Multifamily companies that have suffered from the dearth of pre-stabilized or business loans would also welcome more lending from the banks, but we will continue probably have to continue to wait. And every minute of credit freeze it appears the clock will tick, with the accumulated effects of the capital shut-off to be manifested down the road in a serious recession. And even as we speak, other fronts are opening in the financial crisis, consumer confidence hit an all-time low and home prices plunged by the biggest amount ever.  In early October, I had a conversation with my brother—just a layman who has been reading the news—in which he said the way for a bailout of the economy is for the government to take over (read, “nationalize”) the banks and “FORCE” them to lend to help unfreeze the credit markets and to keep the economy going. Perhaps even a private citizen was able to forsee what may be happening, with the banks sitting on the cash injection instead of trying to restore loan activity to whatever extent. To comment, e-mail kfoong@multi-housingnews.com