September 21st, 2011 saw the pledge of thirteen of the largest banks in the United States, including the largest four, to commit $20 billion in small business loans over the next three years. Such news comes as a welcome investment in future American business opportunities after the precipitous decline in American investment following the failure of the mortgage market and its subsequent impact on lending.
American small businesses faced a major decline in lending in the last few years, from $700 billion to $600 billion, which has impacted a great number of employers, employees, and broader economic conditions, and contributed to the anemic market in general. Though $20 billion doesn’t sound like a great deal of money given the extra zero on the end of the overall quantity of small business lending, it represents 20% of the gap that needs to be filled. Better 20% full than none.
This comes on the heels of a great deal of news that indicated that, even after the many bailouts received by the major banking institutions, lending had not increased, which was a major purpose of the bailouts to begin with. Without bank loans, many small businesses floundered or shuttered altogether, and the taxpayer-funded bailouts went nowhereâ€"â€"or rather, stayed in the hands of the people that were supposed to give it away.
This has led to extraordinary distaste for many Americans and others around the globe, and has culminated in public protests (most recently at Chase Bank in Seattle), arrests, and other civil action by a large number of people, though at this point clearly not enough to effect the sort of changes the protesters desire. Although news of lending is unlikely to completely circumvent such unrest, it is at least a step in the right direction, and something the economy needs at this time.
The banks included in this list are Bank of America, Wells Fargo, JP Morgan Chase, Citigroup, KeyBank, Regions, M&T, Huntington, Citizens, TD, US Bank, PNC, and SunTrust. This represents quite a substantial list, including, as mentioned, the top four players in the industry.
On the other hand, the combined investments of the thirteen participants amounts to a paltry $1.5 billion per participant. In other words, the news can be read a number of ways; too little too late, or long overdue. At any rate, it will precipitate the growth of whatever industries are able to secure such capital.
The banking industry has a lot to do to repair its tarnished image that, over the last few years, is likely to lead to permanent political damage if the political atmosphere in Washington ever comes to represent the disaffected millions whose opinions of the banks have become so extraordinarily virulent. This move will likely placate a few, but there is certainly a long way to go in gaining the trust of the American public. The fiscal difficulties of the major banks have led Moody’s to downgrade the debt ratings of Bank of America, Citigroup and Wells Fargo, due to the fact that further bailouts will not be forthcoming, and banks in such a position as those that required bailouts will be unable to secure them in the future, due to political as well as monetary realities. It will cost a bit more than $20 billion to get back in the public’s favor.
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