Bank Lends Conservatively, Gets Pressured And Criticized By Government For Not Loaning Enough

• March 17, 2009

The economic crisis we’re currently in is the result of banks making too many loans to people who had no business taking them. The solution should be for banks to get back to more conservative lending practices, giving money only to those borrowers who are likely to pay it back.
Unfortunately, the government doesn’t get that. The attitude, as set by the Obama administration, is one that believes throwing more government money into the system to encourage more free lending is the way to fix things. Even to the point of criticizing and pressuring banks they feel aren’t lending enough.

Joseph A. Petrucelli is one of the most cautious bankers in America.
In fact, Petrucelli is so cautious that the Federal Deposit Insurance Corp. recently criticized his bank for not lending enough.
The FDIC’s negative review of East Bridgewater Savings Bank’s loan volume is an anomaly in today’s current banking scene as lenders reel from their role in offering too many cruddy mortgage products to borrowers with weak credit.
Still, the FDIC slapped East Bridgewater Savings with a rare “needs to improve” rating after evaluating the bank under the Community Reinvestment Act.

Here’s what East Bridgewater Savings did to deserve this criticism from the FDIC:

Petrucelli and his bank occupy the other end of the spectrum in an industry that lost $26.2 billion in the fourth quarter. Even the FDIC’s own deposit insurance fund is in bad need of a boost after paying for an upswing in bank failures.
And then there’s East Bridgewater Savings.
Bad or delinquent loans?
Zero.
Foreclosures?
None.
Money set aside in 2008 for anticipated loan losses?
Nothing.
“We’re paranoid about credit quality,” Petrucelli said. The 62-year-old chief executive has run the bank since 1992.

No good deed goes unpunished.
Petrucelli and his bank should be a model for banking excellence, an example of the sort of fiscal discipline that can lead us out of this mess we’re in, not a target for criticism from the federal government.
These are crazy, crazy times when bad bankers get billions in subsidy from the government and good banks get targeted by regulators.

Tags: Asshats, Domestic Issues, Politics

http://Array Brent

But you may want to think about your statement a bit; do you really want your local bank to take money from your community and either invest it elsewhere or refuse to invest any of it.

Which shows you know nothing about money and banking. This statement is ludicrous.

Brent: There aren’t any corporations, public or private, immune to the laws of the federal government. So, your comment makes no sense.

Nothing you’ve said makes sense. The FDIC is not a “corporation”. It is a government agency. Live with it or change your pen name to George Orwell.
Brent

FDIC=Federal Depost Insurance Corporation.

Gosh, it doesn’t get much clearer than that.

Sure, and the “economic stimulus” will “stimulate” the economy, too, right? “Gosh, it doesn’t get much clearer than that.”

While we are at it, the “economic recovery act” passed in the Spring of 2008 also led to “economic recovery”. After all, it had to so, right? Otherwise, why would the politicians have named the act like that?
8 Kilo 1

The FDIC is not a “corporation”.

FDIC=Federal Depost Insurance Corporation.

Gosh, it doesn’t get much clearer than that.
8 Kilo 1

doonuts: Don’t let the facts bother you.

It’s not Bush’s fault (this time), either. The FDIC is run by the industry.
8 Kilo 1

Except that they did.

No. FM and FM didn’t make any loans. At least try and get your “facts” in order before you look foolish.
doonuts

Ohhhhh, it’s all Bush’s fault, right. Sorry, 8 kilo , but Barry owns it now. You need to find another excuse.
Hal

Is anyone ever going to notice that you can’t lend if no one wants to borrow? These doofuses seem completely oblivious of the depth and breadth of the contraction in consumer spending—much less the reasons for it and the way to fix it. — Surfer Agrees with Wells Fargo CEO: Stress Test is Asinine
Spartacus

do you really want your local bank to take money from your community and either invest it elsewhere or refuse to invest any of it.

The small banks I’m assuming you’re referring to as local banks are indeed for the most part sound. In my neck of the woods I can get a loan for practically anything I want through a local bank at a reasonable rate, they want to loan money, and they have a good feel for who is and is not a good risk. The problem lies with the banks that list on the NYSE, the ones that dreamed up the concept of the ARM and used it as a means to loan money to those who could afford 4.5% at the moment but not 5.5% three years down the road, those that wanted to “flip” houses, but the government gave the message that it was okay, that’s what Freddie and Fannie where there for. Now we’re all paying for it.

Really can’t even blame those banks either, after all if you go to a restaurant and order a lobster when you can only afford hot dogs, is it the restaurants fault you can’t pay for what you ordered?
http://www.valleydeals.com/cgi-bin/board2/YaBB.pl Kevin

Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting different results”.

Barry is insane.
http://insanereindeer.blogspot.com/ Kenny

No. FM and FM didn’t make any loans. At least try and get your “facts” in order before you look foolish.

Except that they did. They stepped in and paired lender with borrower, and then, in a lot of cases, supplied much or all of the money. They don’t directly loan the money, but it’s still the same thing. That’s from their websites.

Errrr, the FDIC is an independent Government agency. It receives no Congressional funding; it is funded by member banks and financial institutions.

Which is required by the government. It is funded by rules set by Congress, and operates as every government agency does: directly accountable to Congress, but operated by a seperate beaurocracy.
8 Kilo 1

Brent: There aren’t any corporations, public or private, immune to the laws of the federal government. So, your comment makes no sense.

RR: No, bad loans didn’t get us to this point.
8 Kilo 1

I think that his way of banking is the right way. They shouldn’t make bad loans or foreclosures. That’s just wrong.

As the head of the FDIC ( a former Bob Dole staffer) said recently, the FDIC doesn’t require anyone to make bad or risky loans.

But you may want to think about your statement a bit; do you really want your local bank to take money from your community and either invest it elsewhere or refuse to invest any of it.
sayanything-4625

The FDIC is run by the industry

Wrong, the FDIC is an arm of the Federal Government. To be specific the Federal Banking Act of 1935 makes it an arm of the Executive Branch. There are two differences between an Executive Agency and an Independent Agency.

1) An Executive Agency is headed by one man and serves at the pleasure of the president. An Independent Agency usually has board of some kind, and they are free of the President and can’t be removed except for malfeasance or a term of years. This is supposed to insure that they are free of presidential influence.

2) An Independent Agency does not fall under on of the existing Executive Departments. Example the FDIC does not fall under the Department of Treasury. It is independent of that department.

http://legal-dictionary.thefreedictionary.com/Independent+agencies+of+the+United+States+government

Administrative agencies are made up of experts in the field in which the agency operates. For example, the Maritime Administration employs experts in the areas of sea commerce and navigation to set its rules on merchant marine activities. Many agencies have the power to assess fines or otherwise deprive persons of liberty in hearings conducted by their own judicial bodies, or administrative boards. Given the specialized knowledge within administrative agencies, administrative law judges (ALJs), who hear agency claims and disputes, are loath to overturn the legal conclusions reached by administrative boards. Determinations and sanctions made by ALJs are subject to review by state or federal courts, but a party must exhaust all appeals within the agency before suing in civil court.

An agency’s actions must be in accordance with its enabling statute, and courts will examine the agency records to determine whether the agency exceeded its lawmaking or judicial powers. Rigorous judicial oversight of agencies would defeat a cherished feature of administrative agency by eliminating agency flexibility in resolving conflicts. To avoid this outcome, most enabling statutes are worded vaguely, in such a way as to allow the agencies broad discretion in determining their rules and procedures. To keep agencies from wielding unbridled power, the Administrative Procedure Act of 1946 (APA) (5 U.S.C.A. Â§ 551 [1982]) sets standards for the activities and rule making of all federal regulatory agencies. The APA provides federal courts with a framework for reviewing the rules made and procedures used by administrative agencies. Individual states have similar statutes to guide their own courts.

While the independent agencies are staffed by experts they are not run by the industry.
coledf12

I think that his way of banking is the right way. They shouldn’t make bad loans or foreclosures. That’s just wrong.
jimmypop

so wait… the government is trying to force banks to loan out money…. HOLY $%#!!

DO ANY OF THESE PEOPLE REALIZE WHAT STARTED THIS WHOLE F’ING MESS?!!??!?!?!?!
8 Kilo 1

Errrr, the FDIC is an independent Government agency. It receives no Congressional funding; it is funded by member banks and financial institutions.

Also, it is run by a 5 person Board of Directors who were all appointed during the Bush administration.

President Obama has no power over the FDIC.
http://pennypatch1.com/id220.html Ron Russell

It was the bad loans that helped get us to this point–now the government is calling for more loans to risky applicants. Sounds a bunch of government loons.
http://sayanythingblog.com/ likwidshoe

8 Kilo 1 – FDIC=Federal Depost Insurance Corporation.

Gosh, it doesn’t get much clearer than that.

Huh? Try this one on for size:

Federal Reserve Bank

1. It’s not federal.
2. It’s not a reserve.
3. It’s not a bank.

What was it that you were saying about, “Gosh, it doesn’t get much clearer than that.”?

Try not to choke.
Brent

Errrr, the FDIC is an independent Government agency.

An independent government agency? An agency, created by Congress, that enforces laws Congress passes. Errrr is right.

If this is the standard, then the EPA, NLRB, SEC, and on and on are also “independent” government agencies. “Independent” of what?
http://sayanythingblog.com robport

“Independent” of what?

The consent of the governed, usually.
http://sayanythingblog.com robport

No, bad loans didn’t get us to this point.

Except that they did. At the time of their collapse Fannie/Freddie, two government-sponsored entities, owned 51% of the $12 trillion mortgage market. When they went down it started a chain reaction that brought us to where we’re at.

Once you take the partisan finger-pointing out of it, the truth really isn’t that complicated.

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Bank Lends Conservatively, Gets Pressured And Criticized By Government For Not Loaning Enough

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