23 May 2011
The big lie of banking
The news this morning that the banks are already 12 per cent behind in their lending to small and medium-sized businesses is one of the least surprising pieces of news I have heard for months.
The problem is one piece of obfuscation that gets in the way of everything else. Neither the politicians nor the bankers will admit it - in fact they collude in this - but the big banks are no longer able to lend effectively to the SME sector. It isn't that they won't, it is that they have consolidated beyond the point where they can. They have no systems, no local managers, which would allow them to. But until the politicians accept this, and the bankers admit it - which they do privately - we can't move on.
The Merlin agreement is based on this same untruth, which is why it is so flawed. Once the politicians admit the truth of the matter, it might be possible to negotiate an agreement with the banks that would help both sides - it would set out the contributions we need from them to set up a new community banking sector that is capable of lending to SMEs in key areas. In return, we would put an end to the argument that they should be lending more when we know they will not.
A friend of mine who has a small business approached their bank for a loan last week. They were told they had three options, a loan to buy a car, a loan to go on holiday or to put it on their credit card. This is another symptom of the Big Lie. It is time someone in frontline politics had the courage to nail it once and for all.
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Comments
23 May 2011 at 15:38
Dave at Vote For Yourself
Gambling is an addiction so when the bankers lost all the money, it was unwise to lend them loads of cash so that they could start gambling again. That's how they make their big bonuses, lending money in big corporate buyouts and that's why they can't be arsed to lend our own money back to us.23 May 2011 at 16:58
Bill Kruse
Can we stop pretending that the banks lend anyone anything? They create money and that's where we get all but a few percent of our money from. More here http://www.economania.co.uk/where-money-comes-from.htm It's pretty pointless having any discussion about economics without reminding ourselves of and accepting the fundamentals. BB25 May 2011 at 18:34
Anonymous
You have hit the nail on the head. But there is one bank that can. Three years ago I went to 4 High Street banks for a small mortgage to buy a factory off the landlord for my business with 3 years of trading profits. The mortgage repayments would have less than the rent. One was not interested. Two wanted a charge over my house. The fourth sent a manager out to look at the business, asked what I thought were good questions and lent the money. The first 3 went bust. The lending bank did not take a penny off anyone during the bailout.26 May 2011 at 10:00
Anonymous
So was this bank HSBC? (as Barclays took-on some private investment during 'the crisis')31 May 2011 at 13:11
Anonymous
Then why so reticent to name names? The statement is totally plausible, but without specifics it only serves to further endorse the mysticism so inherant in discussions about banking economics. Perhaps it was the 'bank of Mum & Dad', which is becoming an increasingly big player on the scene? With the wealth of generations tied up in property - mainly owned by the 40+ contingent - the London Mayor has recently called for tax breaks for parents who help their children meet the deposit for a first-time-buyer mortgage.