How Can There Be a Credit Crisis?

[dad911]

Originally Posted by Wayne at Pelican Parts

My bank is dying to lend Pelican money - six figures. I don't see it either on this end...

-Wayne

If your business has anything to do with RE, be prepared. We have a performing loan, never missed a payment, due for renewal, and have to escrow 6 months of payments to get a 6 month renewal. (may be lucky and get a year) .....effin gov't bank examiners.

[jyl]

Originally Posted by dad911

If your business has anything to do with RE, be prepared. We have a performing loan, never missed a payment, due for renewal, and have to escrow 6 months of payments to get a 6 month renewal. (may be lucky and get a year) .....effin gov't bank examiners.

What do the govt regulators (examiners) have to do with this?

[blk911]

The credit crisis is the reticence of the money center banks (read mega banks) to lend to each other for overnight borrowings. Basically, every bank at the close of each day either borrows money to cover it's existing loans or if they have deposits in excess of loans and required reserves, then they lend those funds to other institutions in need. Basically, if you don't know how ugly another bank's balance sheet might be or not completely confident they can pay you back, you don't loan them the money. Usually, that bank could just then go the the Fed window (Fed Funds, Discount window) and borrow from them, unless they are maxed on their credit limit or the Fed has otherwise recognized them as impaired.

Community banks are generally not in this situation and are still eager to do business with good customers. Maybe a power shift, although the recent bail out is releveling the playing field to the chagrin of the community bankers. Community banks are always a better bet for the small business and middle market business owner. Trust me on this, I have worked for both the mega banks and community banks, smaller is usually better.