tag:blogger.com,1999:blog-9619963.post5930272989698709682..comments2023-12-08T12:50:34.303-08:00Comments on W.C. Varones: New Year's Resolution: Stiffing the Dirty BankstersW.C. Varoneshttp://www.blogger.com/profile/17663570682958847976noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-9619963.post-73004042206399537772011-01-02T08:21:51.273-08:002011-01-02T08:21:51.273-08:00People have seen bankers in the same light as lawy...People have seen bankers in the same light as lawyers, politicians, etc. for a long time, probably even before "It's a Wonderful Life" and Mr. Potter. As a commercial loan underwriter for a bank, I've seen a few things that make me shake my head. Banking is almost like a commodity. Most banks provide the same services with the same fees. Banks typically follow what their competition does, almost to a fault. Banks are in business to make money, and it's kind of hard to make money when you give your services away. Like any business, a bank will charge customers as much as it can get away with and still keep customers.<br /><br />Credit card debt is not secured by any collateral and has a minimal approval threshold...that increases the default risk to the bank, and that is why credit card rates are significantly higher than what banks charge on loans that have collateral.<br /><br />IMHO, banks do serve an important function in the economy, one which I'm very familiar with. Banks loan money to businesses that want to expand but do not have the cash on hand to do so. Yes, sometimes things fall apart and the borrower can't pay. But usually, borrowers are happy to take on some bank debt in order to open a new location, build houses, or purchase seasonal inventory. They pay on time, and both the business and bank are happy with the arrangement.<br /><br />Almost all the home builders in my city have bank debt with several banks. It's just how that game is played. Without banks willing to finance the purchase of land and the development of that land into lots and houses, the only companies that would be able to build houses are the national builders (that usually have their own financing department) and maybe the occasional builder who happens to have $10 million under his mattress that he's willing to sink into some raw land and finance 100%. <br /><br />Banks can lend out tens of millions of dollars at a time because of its depositors and because of its fees (not saying I agree with fee structures or rates, but that's where the money comes from). Without a bank that acts as a federally-insured depository for all those deposits, that money would never be loaned out to businesses in the amounts they need. Businesses would be forced to pay for expansion out-of-pocket or find alternative financing, which probably wouldn't be able to match a big bank's rate or terms.<br /><br />Businessmen are (usually) not stupid, and that's why they get loans from banks. I've seen hundreds of financial statements from all sorts of businesses. I've only seen one (a national restaurant chain) with any significant amount of assets or revenue that had no debt of any kind. All the others have some sort of debt, usually bank debt. Without banks to make those loans, where would businesses get that money?Scottnoreply@blogger.com