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Jeff Lacker: Credit markets not broken



December 16, 2008 – Comments (6) | RELATED TICKERS: C , BAC , WFC

Click here, scroll down to Mr Lacker's podcast.

He says:  “My reading of current conditions is that bank lending is constrained more now by the supply of creditworthy borrowers than by the supply of bank capital.”

Clear enough, isn't it?  The markets are working.  Lending is down because the transactions aren't in the interests of market participants.

Same article points out that the regional Fed chairs aren't getting any votes in the current actions of the Fed.  They are invited to conference calls at which Bernanke explains what the Fed is going to do next.  In a way, this is Lacker (chairman of the Richmond, VA Fed) hitting back.

6 Comments – Post Your Own

#1) On December 16, 2008 at 9:22 AM, cubanstockpicker (21.08) wrote:

That still is a constraint, now they only want to borrow to Excellent credit scores and perfect balance sheets. How many people do you know that have that?

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#2) On December 16, 2008 at 10:58 AM, ikkyu2 (98.05) wrote:

Quite a few.

Point being, if you have poor credit, borrowing money is not part of your Universal Declaration of Human Rights.  No one disagrees about that, except maybe the people who abused their credit scores in the last decade. 

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#3) On December 17, 2008 at 5:37 PM, adventurerneil (20.15) wrote:

Google 'Mohammad Yunus' - I think he would disagree about credit being a universal human right.

Good article, though. I've been thinking the same - the money is there.

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#4) On December 18, 2008 at 12:32 PM, ikkyu2 (98.05) wrote:

There has been an oversupply of capital for decades.

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#5) On December 18, 2008 at 1:20 PM, dwelllewd (27.39) wrote:

'Clear enough, isn't it?'

ABSOLUTELY NOT.  'Supply of creditworthy borrowers'... This is a clever twist of semantics that obfuscates the issue at hand.

Masses of 'creditworthy borrowers' did not sudden step off the planet.  Creditworthy borrowers are not being supplied to meet the demand of housing(?!?).

Creditworthiness is not a fixed quality.  Even for individual lenders, it is not a fixed line based on past credit.  It is a dynamic quality, which has at least as much to do with the observer as with the subject.

The question is will enough capital be allocated to lending.  Investors are mainly going to consider whether or not default and prepayment losses from a pool of loans at legal rates exceed the gains from said pool in sufficient amounts as compared to its risk to make it an attractive investment.

At any rate, I am glad we are not in the magical land where the problem is a lack of creditworthy borrowers..can you imagine how long it would take to birth and raise enough creditworthy borrowers to fix the problem.

If you want to consider supply and demand in our actual reality, consider the supply of residences to the demand of those able to purchase. 

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#6) On January 07, 2009 at 1:20 AM, ikkyu2 (98.05) wrote:

" It is a dynamic quality, which has at least as much to do with the observer as with the subject."


The observer wants to know if the payments are going to be made on time.  This is not subjective.  Either they are or they are not. 

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