Loosening the small business lending faucet
It was inevitable that I would be delayed heading back to Albany yesterday; after all how could Amtrak possibly be expected to anticipate and prepare for a Northeast snow storm ?
So As I waited and waited…and waited in Pen Station for a train to come to take me back to Albany I had plenty of time to think about life’s big questions like: Is the Russian train system crippled by snow storms? Why in God’s name do you call for a pass one yard from the end zone when you have the best short yardage running back in football? And when exactly does the Sports illustrated swimsuit issue come out?
Another question I pondered was why Congress doesn’t do all it can to help the small businesses it professes to love so much? There has been ample evidence over the last six years that banks have made it more difficult for small businesses to get loans even though quantitative easing made cheap money available by the truckload.
The latest evidence that banks remain gun-shy, albeit slightly more willing to invest in main street comes from the Federally Reserve’s quarterly survey of senior loan officers released yesterday. In the quarter ending in October lending terms to small businesses (Defined as businesses with less than $50 million in assets,) remained unchanged at 91% of banks and “eased somewhat” at a little more than 7% of institutions. The numbers are slightly better at smaller banks but nine out of 10 loan officers at these institutions reported that lending terms are holding steady.
Now I’m not out to criticize the banks. They are understandably still a little reluctant to lower commercial standards until they know that the economy is on a consistently upwards trajectory. My point is that this survey is yet one more example of how small businesses need all the loan options they can get. There are Credit unions that would love to provide loans but are hampered by having to manage an arbitrary MBL cap. Hopefully Congress will recognize the value of raising the MBL cap, its good for local business and its mandate relief that doesn’t cost the taxpayer a dime,
Here is a link to the survey which also provides a snapshot of mortgage underwriting standards.
Student Loan Guidance
Since I took yesterday off I didn’t get a chance to tell you about a joint guidance to financial institutions giving banks and credit unions a cautious green light to offer graduated repayment terms on private student loans. As the Guidance explains:
“ Financial institutions that originate private student loans may offer borrowers graduated repayment terms in addition to fixed amortizing terms at the time of loan origination. Graduated repayment terms are structured to provide for lower initial monthly payments that gradually increase.”
With student debt now exceeding $1 trillion even as the job market for graduates remains bleak and wages continue to stagnate I suppose any regulatory recognition that greater loan flexibility/creativity is called for when it comes to financing college but let’s not let the colleges and universities off the hook. At some point tuition increases have to be brought under control or no amount of creative financing is going to keep college affordable for all but the wealthiest of families.
Here is the Guidance
Here is a Newton like realization had waiting for my train to come: Your electronic ticket is only as good as your smartphone’s battery life.
Have a good day.