Posted by: energyblogwalter | January 26, 2009

Banks are bad, long live the bank

The continual lament that banks should loan more credit out while at the same time thanking the banks for being more austere in their lending is complete hypocrisy and bears comment.

Our political system was not too long ago thanking the Canadian banking system for been too conservative in its loaning practices thus preventing much of the damage witnessed south of the border. It was then asked to become less stringent which they have been lukewarm to attend.

If the economy didn’t tank as bad as the USA because of these stringent measures then we cannot surely ask these same banks to forgo these efforts in order to provide easier credit in a time of crisis? “Let’s make really poor loans now, since we did such a good job of not allowing poor loans already”. It’s totally crazy.

Even with government paper to back it up, do they want the banks to go out of business?  Governments around the world have been busy nationalizing, not privatizing. The banks must wonder if their government knows what country they live in.

This demands a mental shift. During a time of economic downturn is not when to expect easy credit. We simple have to accept that the banks need to continue to do their job now more than ever, and we can’t ask them for easy credit. Anything less is political interference and in line with what the USA did to itself.

We need to get over easy credit. This is just not going to be a year for the banks. Best to just reduce and pay off your debts. It’s not sexy and will not lead to spontaneous job growth in the normal way, but right now that’s not as important as restoring the banking sector to solvency. Once the banks themselves are not dismayed over the colossal spending and weak repaying habits of Canadians then they will feel likely to lend. No point in making this artificial.

As well when Canadians are themselves more or less solvent they will invest locally in businesses. Asking banks to do the same is a complete risk and they’ll need to wait this one out.

Personal responsibility is a chore, but should we wish to see our apparently unique benefits bear fruit we need to choose what works, not follow the very people who couldn’t do what we already did.

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Responses

  1. i think banks are never bad, but maybe and under some circumstances life can be bad…

  2. thanks for the comment,

    I was trying to make the point instead not about showing banks being good or bad, but in saying they have a role to play and we need to respect what they have done so far. However in blatantly ignoring their role we are mistakenly calling them ‘bad’ when we are the one’s at fault for our own debts.

    cheers


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