Real-estate mogul Donald Trump says banks’ unwillingness to lend threatens economic recovery and that the government must force the banks’ hands.
Even if you have a building project in Manhattan that will create jobs and has solid tenants, you’re unlikely to get a loan, he told CNBC.
"The banks are not loaning money . . . no matter how prime you are, no matter how rich you are, no matter how good your development," Trump said.
Bank loans outstanding fell 2.8 percent, or $210 billion, in the third quarter, according to the Federal Deposit Insurance Corp. (FDIC). That’s the biggest drop since the data series began in 1984.
It also marks the fifth straight quarterly decline. The decrease cut across almost all sectors from mortgages to business loans.
"This economy can never come back until the banks are forced to loan money, and it’s really the money they were given by the government, but they’re not loaning it," Trump said.
The government must do more than beg, he argues.
“Unless the government is going to take very harsh action with the banks and force them to loan money, it’s not going to happen. This economy isn’t going to be coming back very quickly.”
Given this scenario, Trump says it’s a great time to invest in real estate. “You can buy things that are phenomenally priced,” he points out. “We’re buying a lot.”
Trump’s not the only one worried about bank lending.
“There is no question that credit availability is an important issue for the economic recovery," FDIC Chairman Sheila Bair told reporters. "We need to see banks making more loans to their business customers."
She reiterated that the government should help banks sell their toxic assets to free up money for loans.
"Credit adversity . . . remains with us," Bair said. "We expect that it will be at least a couple of more quarters before we see a meaningful improvement in the trend."
Large banks, which received the most bailout money, accounted for a disproportionate share of the plunge, according to the FDIC.
The agency also reported that troubled loans have risen to their highest level in 25 years. The number of problem banks, 552, registered a 16-year high, and banks’ loan write-offs a 25-year peak.
"A few very large banks are making a pile of money, and the rest of the industry is hurting," Daniel Alpert, managing director of investment bank Westwood Capital, told The Toronto Globe & Mail.
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