With unemployment figures rising to 9.2 percent in June and cries for creating jobs, one of the overlooked --- especially by media --- “villains” in the picture are banks which continue to be stingy on making loans for expansions of businesses, notes Grumpy Editor.
More than 14.1 million workers are currently unemployed. The number of long-term unemployed, those jobless for 27 weeks or more, remains steady at 6.3 million.
Many small businesses, especially, are handcuffed in hiring additional workers, expanding or making capital expenditures because of tight credit.
This includes businesses with solid bottom lines and long relationships with financial institutions that remain frugal when it comes to loans.
However, major banks welcome deposits, but at puny interest rates.
Citibank, Bank of America, Wells Fargo and other major banks pay a minuscule 0.30 annual percentage yield (APY) or less on one-year certificates of deposit (CDs).
Despite sluggish loan growth in its latest quarter, J.P. Morgan Chase, for example, posts a strong increase in profit while loans fall 4 percent from a year prior.
Many financial institutions are thriving on fees and other charges.
Some businesses need bank funds to cope with inflationary pressures, even though federal announcements claim inflation remains “tame,” a word echoed in media reports.
Meanwhile, bankers with low loan output point to regulators urging lenders to demand proof that loans will be repaid. In addition, loan officers claim there is less money to lend because regulators are requiring banks to hold more capital in case loans default.
Bottom line: Correcting the current tight money problem for businesses still points to Washington legislators and the White House which can remedy the situation in efforts to boost the economy and create jobs to get America back on track.
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