Once Bitten, Twice Hold Your Cash

  • JJ Hornblass
  • April 5, 2010
  • 0

There’s a stubbornness among the nation’s lenders that doesn’t seem to be subsiding, and Lawrence Summers’s rap on yesterday’s talk shows offers a glimpse why.

Consider lenders in Colorado. Like elsewhere in the nation, lenders in the Boulder State are not making commercial loans with any consistency, and who can blame them? Bankers have been bitten by regulators once; the bankers will hold onto their cash now:
Local bankers, such as Jim Strovas, Colorado market president for Rawlins National Bank, said overkill on the part of bank regulators has become the norm.
“The regulators have come down exceedingly hard on all financial institutions, based on the amount of commercial real estate they have in their portfolio,” said Strovas, adding that about 85 percent of his bank’s loans are small-business or agricultural loans. “The analogy we use around here is the regulators are killing flies with a baseball bat.”
And, yes, regulators deserve some of the blame for the lending drought today. They were overly forgiving during the credit boom and they are being overly onerous during the credit crisis.
But that’s not the key issue today. It’s still economics, and the economic environment remains challenging. Yesterday, Lawrence Summers, President Obama’s key economic advisor, explained that the nation’s economic situation remains strained:
Summers predicted the economy will continue creating jobs but slowly and that the unemployment rate will decline slowly because more people will start trying to find work as the economy improves.
And really the economic predicament remains the paramount consideration for commercial lenders — or at least it should. Whatever the regulatory clampdown, if lenders wanted to make loans, they would. And they will when the economy shines truly.
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JJ started the first iteration of Bank Innovation back in 2007, and has been working on it ever since. He also serves as President & Chief Executive Officer of Royal Media, Bank Innovation’s parent. He founded Royal in 1995 and oversees all aspects of the New York-based diversified media company. Prior to forming Royal, JJ was on the editorial staff of American Banker, the daily newspaper, and worked as an editor of a business magazine in Hong Kong. As a reporter and editor, he has won journalism awards from the National Press Foundation, Newsletter & Electronic Publishers Foundation, and the Reader’s Digest Foundation. He has a BS in Economics from Yeshiva University and a Master’s from the Columbia University Graduate School of Journalism. He was also a Fellow at the University of Wisconsin-Madison Graduate School of Banking. He lives in New York City with his wife, two daughters, and son. He counts among his accomplishments one New York City Marathon, two New York City Triathlons and the 2010 Father’s Day 5K, the first race he ever ran with his daughters. He can be reached at hornblass@gmail.com or 212-564-8972.

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