tag:blogger.com,1999:blog-3338200031275376565.post6614730560371397555..comments2023-11-02T07:38:56.988-04:00Comments on John Lunn's Basically Economics Blog: What Happended to Toxic Assets?John Lunnhttp://www.blogger.com/profile/07770147825287832691noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-3338200031275376565.post-38869155913419646002010-03-19T12:09:06.493-04:002010-03-19T12:09:06.493-04:00Professor Lunn,
I think are a few other factors i...Professor Lunn, <br />I think are a few other factors involved in the lack of lending by financial institutions (and I'm not so certain that "more lending" is optimal). <br /><br />First, regulatory uncertainty has definitely been an issue. Politicians and the media have blasted institutions for not lending, especially to small businesses. However, the unseen is that banking regulators are often requiring writedowns on existing loans - even some loans that are currently performing. This regulatory uncertainty has surely put a chilling effect on some institutions willingness to lend. Further, writedowns of existing loans could be preventing some institutions from making additional loans because their capital levels are not sufficient to engage in certain lending projects.<br /><br />Second, in the industry that I work in - credit unions - institutions are limited in their ability to make "member business loans" by an arbitrary cap. While there are certain exceptions to the calculation, generally credit unions are not allowed to lend more than 12.25% of their assets to members that are businesses.<br /><br />At least too me, it seems counterintuitive for politicians and the media to see more lending - regardless of credit quality - as the solution for a problem that involved unwise lending. The granting of loans is a detailed, intricate process and the pleads for "more loans" - whether they be to lower-income persons or small businesses - will not magically make these borrowers more able to repay their loans. <br /><br />BTW, I've enjoyed reading both your blog and Professor Claar's blog.SVBhttps://www.blogger.com/profile/17136341674201498060noreply@blogger.comtag:blogger.com,1999:blog-3338200031275376565.post-2076795314537660042010-03-19T11:09:48.461-04:002010-03-19T11:09:48.461-04:00John, I've been curious about toxic assets as ...John, I've been curious about toxic assets as well, especially since I also haven't heard much about them lately. I recently heard an NPR podcast that shed a little light on the topic. <br />http://www.npr.org/blogs/money/2010/03/podcast_we_bought_a_toxic_asse.htmlAnonymoushttps://www.blogger.com/profile/07210006537404703688noreply@blogger.com