U.S. Pressures Banks to Lend, Warns on Dividends (Update2)

[babylonsister]

U.S. Pressures Banks to Lend, Warns on Dividends (Update2)

By Scott Lanman and Alison Vekshin


Nov. 12 (Bloomberg) -- The Federal Reserve and other U.S. regulators told banks to maintain lending to ``creditworthy'' borrowers, and warned against dividend levels that would cut funds available for loans, causing a deeper economic slump.

Supervisors will act ``when dividend policies are found to be inconsistent with sound capital and lending policies,'' the Fed, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision said in a statement. Dividends shouldn't be at levels that would hurt the ability ``to meet the needs of creditworthy borrowers.''

``What they're asking banks to do is preserve as much capital as they can so that banks can lend more,'' said Mark Tenhundfeld, senior vice president of regulatory policy at the American Bankers Association. ``The banks I've talked with say they have plenty of capital, they are meeting the loan demands and they are not paying out excessive dividends.''

Legislators in Congress have expressed concern banks aren't using cash from the $700 billion U.S. program to revive credit. Senate Banking Committee Chairman Christopher Dodd tomorrow holds a hearing with four large U.S. banks on their use of the funds. House Financial Services Committee Chairman Barney Frank said Oct. 31 that using cash for non-lending violates the law.

``They are trying to sort of substitute a gentle nudge for what would otherwise be a much more forceful and destructive directive coming directly from Congress,'' said Sean Ryan, an analyst at Sterne, Agee & Leach Inc. in New York.

more...

http://www.bloomberg.com/apps/news?pid=20601068&sid=aBCAlF_ZygQA&refer=home

[Mike 03]

1. Good, but the institutions should have to present evidence that they are lending. There needs to

be more due dilligence here. The Fed and the Treasury should not simply take on good faith that these banks are lending. They clearly are not. The "lending" was the most important part of this whole deal. The capital infusion was supposed to incentivize the lending, but somewhere somebody didn't get the message.

[Hydra]

2. Which is an insane idea in itself

They lend out our tax dollars, make a profit on the interest, and probably won't pay us back later...and this is STILL too hard of them to do instead of buying out their competitors.