What We're Hearing

The rub on banks is this: that they're not lending, right? We hear it time and time again from the pundits on CNBC. In fact, I saw a few pundits this morning on the station, saying it. The problem appears to be "business lending" per se. But should a bank extend credit to a venture that isn't on solid footing? On occasion, you'll see a bank take out a full-page ad in The New York Times or The Wall Street Journal, bragging about all the lending it's doing -- and all the loan modifications. Is it a matter of perception? Of facts? Well, we know this: that mortgage bankers (depositories and non-depositories alike) funded $503 billion of home mortgages in 3Q which works out to an annual run-rate of $2 trillion. (Figures courtesy of the Quarterly Data Report.) As for next year, estimates range from a low of $1 trillion to a high of $1.8 trillion. That's quite a disparity. Then there's the loan modification "situation." New Home Affordable Modification Program figures were released this morning. As of mid-November, 680,000 borrowers are in active modifications -- but very few of those are "permanent." (See the National Mortgage News website early this afternoon for a complete update.) When it comes to loan mods the 'elephant in the room' is this (and it's an issue that government officials don't recognize): you can't safely restructure a mortgage for those who are unemployed. Meanwhile, The Washington Post recently published a story about the first TARP Czar Neel Kashkari who is now decompressing in the woods of Northern California. He reveals this interesting fact about the early days of TARP: that his friends back in Ohio wanted him to use some of the money to buy the Cleveland Browns football team...