Is it time to by-pass the banks?

Question

The government spent billions of dollars to bail out the banks in hope to stabilize the financial infrastructure so bank would start lending again. It seems to fail for the most part.

Wouldn't it be better if the government have let those banks fail, created a temporary banking system and funnel that money directly to people and businesses?... and if so, is it too late?

Steve Babiak · Answer

Eddie,

I think the banks need a bypass - coronary bypass surgery to be more specific :)

As for government creating a "temporary banking system": for some reason, I just don't like the sound of that.

Not sure how to solve the "get banks lending again" problem.  Last time I spoke with one of my bankers, he said that they were lending - it's just that the loans were going to those who "didn't really need them".  The explanation that followed was that those in good financial standing, with reserves and assets could use their own funds and didn't "need" the loans - they just preferred to use the loans (OPM).

As for those who would be a risk to lend to, well, they just wouldn't be receiving loans based on the bank's restricted lending criteria.

Face it.  The banks got burned (foreclosures galore these days), and so now they are afraid to play with that fire that got them burned.

Ted Harris · Answer

If you can prove you don't need the money then banks will lend it to you ....  :green:

Eddie Ziv · Answer

Steve, the explanation  as I heard on one of the financial channels the other day was, that the banks are required  to hold a higher amount in reserve than they used to. Most of those banks that went under, lent more than they actually had. In short, the bail out money went to fill up the reserve instead of making loans.

Shanti S. · Answer

I have a big problem with the entire "too big to fail" excuse and think the banks and the car companies should have been allowed to fail.
          
          But that wouldn't align with the class/economic warfare that's been going on and being refined at the highest levels for some time now.
          
          Not sure what to do about it on an individual level other than bank local, buy local, try to educate your friends, invest directly and/or locally (stay out of the stock market), and be as smart as possible about not paying any taxes you can legally get around paying.

Is it time to by-pass the banks?

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