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Wednesday, April 01, 2020

Never trust the banks

As in 2008, the banks are taking the money the government has given them to help small businesses and are refusing to loan it out:
Nearly a fifth of small British businesses could be forced to close in the next four weeks after running out of cash amid complaints banks are refusing to give them government-backed coronavirus loans.

Many bosses said banks had declined them emergency payments over claims they had not met the required criteria while others could not get through on the phone or were told the money would take weeks to arrive.

Mark Fuller, who owns popular celebrity haunt Karma Sanctum in Soho, said he was unable to apply for funds because he could not guarantee his businesses would be able to start paying it back after six months in the event of a lengthy shutdown.

'The loan is under normal business conditions, which is fine but then don't suggest otherwise,' he told MailOnline. 'I have already been told by the government and Barclays that the only way to receive a loan is by cutting my staff.'

Other bosses were declined payments for having significant cash reserves, despite fears these would not be enough to last out a lengthy lockdown, or because they owned properties that could be used as collateral for a regular commercial loan.

Scott Littlefield, from SPL Management, a property company based in Poole, told MailOnline: "This scheme is not really fit for purpose. Our bank, Nat West, is virtually non-contactable at the best of times and the staff in branch can only deal with personal banking issues, not business. They always say to approach your relationship manager although all relationship managers were done away with in 2010."
If you think the US banks are bad, you should try dealing with a UK bank. They make it almost impossible for a UK-based company to even get a bank account. And, as in the US, they refuse to play what is supposed to be their part in crisis-amelioration efforts.

The governments need to stop looking to the banks to help solve the problem. They ARE the root of the problem, and therefore cannot be part of the solution.

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32 Comments:

Blogger Rabid Ratel April 01, 2020 6:44 AM  

Burn all the banks down!

Blogger Dole April 01, 2020 6:51 AM  

Giving more money to those who can print money is always a great idea.

Blogger Rakshasa April 01, 2020 6:52 AM  

Why do they work so hard to make fascism look good?

Blogger Lazarus April 01, 2020 6:54 AM  

It doesn't sound like they read that PDF from the BOE, or they are not interested in creating money.

Maybe they want to use that money to pay themselves bonuses for a job well done.

Blogger Akulkis April 01, 2020 6:55 AM  

Back in the 2008 crisis, Iceland imprisoned most of their bankers.... where they remain today.

Blogger RedJack April 01, 2020 7:25 AM  

What bank would loan to a small business, when they can just seize the assets in foreclosure?

But as our hist has explained, that is deflationary. Since I deal with the physical not financial world, I will defer to those who know. What I do know is my supply chain is a mess, and loans aren't going to undo the fact some of my vendors are looking at bankruptcy because many of their customers are not essential

Blogger ZhukovG April 01, 2020 7:51 AM  

If they will not answer to the consumer, perhaps they should be made to answer to the voters. Failing that, the hangman.

Blogger Stilicho April 01, 2020 7:54 AM  

So, Mary Poppins lied to us and we can't trust a British bank?

Blogger bramley April 01, 2020 8:02 AM  

Can attest banks here are atrocious. They all want to be estate agents and sideline normal personal banking functions in favour of selling you money for buying a house which is overpriced because of all the money these corporations have invented from nothing. The collusion scandals that came out in the last few years in the UK are the very least of the devious tricks they get up to.

Let them fail as they should, you silly politicians!

Blogger Grooveware April 01, 2020 8:12 AM  

If you look closely at old photos of public hangings you will often count 13 steps , this allows for a good average drop distance and cleanly broken neck, i would hang the lot of those disgusting human beings,i can only dream...

Blogger Brett baker April 01, 2020 8:15 AM  

Bring back the independent sub-Treasury, and have it deal with the banks?

Blogger Joe Smith April 01, 2020 9:08 AM  

"or because they owned properties that could be used as collateral for a regular commercial loan."

Could it get any more naked? The banks apparently directly inform the businesses in question they aren't there to help relieve the economic burden of a shut down, but rather to take a shot at their property.

Blogger Doktor Jeep April 01, 2020 9:15 AM  

Poisoning the wells was a red herring

Blogger JG April 01, 2020 9:25 AM  

The only way to deal with the grabblers who run the banks is to take away their banks. Any other approach lets them off the hook.

It won't happen, but we can hope.

The other thing that needs to happen is to tax advantage capital over debt, but I'm dreaming.

Blogger Jonathon Davies April 01, 2020 9:43 AM  

I work as an accountant. I have had numerous calls from clients saying they either can't get through to the bank, get cut off, are told to provide a detailed business plan that would hold up in normal times, or just plain told they are not eligible. The banks don't want to know, but they will want a big government bailout in a few months time. Speaking to an insolvency practitioner friend of mine, he said he expects mass failings of companies going bust/insolvent/liquidation.

Blogger Silly but True April 01, 2020 10:24 AM  

One of the more profound memories in my city associated with 2008 financial “crisis,” was the inexplicable graffiti that popped up around town on city property like benches and garbage cans, as well as the growing supply of abandoned buildings stating: “Kill the bankers.”

They will either willingly be part of the solution, or unwillingly be part of the solution.

Blogger Oswald April 01, 2020 11:19 AM  

I noticed my bank suddenly changed its website recently with additional layers of security. Was this coincidence or something else. Anyone else see any website/security changes at their banks?

Blogger dc.sunsets April 01, 2020 11:54 AM  

Banking is actually a very important service. Unfortunately, what are called banks today have very little to do with banking.

Only the Ashkenazim could have come up with a con game so perfect as to create something from thin air and then charge rent (interest) on it. The entire economics profession is just an industrial-scale rationalization for con artistry.

Say's Law dictates that the only people who should EVER be able to create credit are producers, and that credit should only last as long as it takes for producers' product to move past the next stage of the structure of production on the way to retail (final) sale. Persistent credit is like a metastatic cancer.

Blogger Dyspeptic April 01, 2020 11:59 AM  

So who gets the helicopter rides first, journalists or bankers?

Blogger KPKinSunnyPhiladelphia April 01, 2020 12:17 PM  

RedJack wrote:What bank would loan to a small business, when they can just seize the assets in foreclosure?

But as our hist has explained, that is deflationary. Since I deal with the physical not financial world, I will defer to those who know. What I do know is my supply chain is a mess, and loans aren't going to undo the fact some of my vendors are looking at bankruptcy because many of their customers are not essential


Though they might be essential to help those businesses cover fixed costs.

For those businesses that do survive this catastrophe, the shedding of marginal customers who are OK to have because they do provide some cash is just ANOTHER terrible outcome, belonging to the "insult to injury" category.

Yeah, my business has survived, but it is weakened, damaged -- like the lung capacity of individuals who were lucky enough to get off the respirator.

Future survival post-pandemic now becomes harder.

Blogger KPKinSunnyPhiladelphia April 01, 2020 12:41 PM  

Further evidence, if any were needed, that incentives matter. Banks have no incentive to be helpful, to be flexible and patient in this pretty short, but still horrible, period of financial dislocation.

If you get a lot emails from places you do business with, you probably have gotten emails that say what those businesses are doing to address the current crisis. For example, one rental car firm sent an email describing the detailed cleaning procedures they were going to use.

But what have you gotten from banks? Silence. Nada.

I don's think the banks are rubbing their hands with glee at the prospect of seizing assets of their borrowers. That's not what their incentive is.

Their incentive is not to have their loans move into the regulatory category of "non-performing" -- which is what most loans for small business are going to be, if not there already. Couple that with the risk-avoidance mindset that permeates banks -- I know that mindset, I used to do consulting work for banks in the US -- and you get bankers hiding under desks, or asking borrowers to take on all the burden.

Remember when the GE talked about dealing with bankers -- he's done a lot of that in his career -- when some media schlub asked him how he was prepared to deal with foreign despots? Recall that he said they were "sharks."

Want to know how Bankers in the USA really think? Peruse "The American Banker," the house organ of the industry.

For example, go here:

https://www.americanbanker.com/news/can-banks-help-rescue-country-without-undercutting-themselves

Money quote:

“So it’s really . . . walking that fine line of being as supportive as we can be, but at the same time not in any way calling into question the safety and soundness of our institution or of the system,” Citigroup CEO Michael Corbat told the Financial Times last week.

Got that? "Fine lines." That's how they think

Blogger patlalrique April 01, 2020 12:47 PM  

I'd like to slightly disagree with Vox. Big Banks can definitely help fix the problem: their downfalls in flames and subsequent eradications will be the solution.

Amenez le goudron et les plumes!!!

Blogger Akulkis April 01, 2020 2:12 PM  

"The only way to deal with the grabblers who run the banks is to take away their banks. Any other approach lets them off the hook.

It won't happen, but we can hope."

Iceland did it in 2008.
And their banksters are still rotting in prison to this day.

Blogger Ominous Cowherd April 01, 2020 2:43 PM  

I'm dealing with a bank right now, trying to get a commercial loan. The banker tells me that she is totally inundated with calls from businesses trying to get some of the free government cheese, and she's having to tell them to wait, because the bank has no official guidance on cheese supply and distribution.

It's irritating to me, because my little real estate purchase isn't going to be affected by the pandemic at all, unless the chaos in her office keeps me from getting financing.

Anyway, the reason banks here aren't lending is because they don't have instructions from on high, according to one bank loan officer.

Blogger map April 01, 2020 2:55 PM  

But it is in the article itself:

'The loan is under normal business conditions, which is fine but then don't suggest otherwise,' he told MailOnline. 'I have already been told by the government and Barclays that the only way to receive a loan is by cutting my staff.'

The guys says he was told BY THE GOVERNMENT and Barclays that he can't get a loan. This is not a policy driven by the banks. It is driven by the government. The government is talking out of both ends of their mouths...saying one thing to the public and another to the banks and allowing banks to take the fall for government policy.

Take a look at these charts:

https://www.barchart.com/stocks/quotes/$SPX/interactive-chart

https://www.barchart.com/stocks/quotes/$SRFI/interactive-chart

Notice how the S&P 500 recovered its 2007 high by 2013, but the S&P 500 Financial sector did not recover its 2007 high January of 2020.

How is it that these banks can just print money out of thin air, but they can't raise their stock prices? They can't increase their dividends or buy back enough shares to recover their prices to their previous highs...when they can obviously do that for thew rest of the market.

Maybe the banks aren't driving these conditions? Maybe someone else is?

Blogger SirHamster April 01, 2020 3:10 PM  

patlalrique wrote:I'd like to slightly disagree with Vox. Big Banks can definitely help fix the problem: their downfalls in flames and subsequent eradications will be the solution.
Put another way, they'll make fine compost.

Blogger Boaty Bear April 01, 2020 3:43 PM  

Use a C130, so they don't even get to enjoy the ride to altitude!

Blogger sammibandit April 01, 2020 6:20 PM  

@map
You're banned. Go away. I never liked your username either.

@KP

But what have you gotten from banks? Silence. Nada.

Good eye. Normies on imgur are in preliminary stages to crowdsource a list of companies worth doing business with based on how they treat employees.

A guy I know I worked at our provincial bank. The pressure to sell was insane because these people were never hired as sales agents and of course never trained.

Blogger patlalrique April 01, 2020 6:21 PM  

@SirHamster (comment #26)

Well, I do not know what will happens to the bankers but whatever it is they will have brought it on upon themselves.

Blogger Pathfinderlight April 01, 2020 11:28 PM  

The reason so many companies are threatening to go under right now is that they have all taken out huge amounts of debt to protect themselves from leveraged buyouts, where investors buy some stock, sue-bully other investors to create a controlling stake, and strip the target company of its assets, then pocket short term gains.

In other words, Western law is incompetent to protect responsibly run publicly traded companies and is not fit for purpose.

There's two ways around that...amend the law, or amend the businessmen.

Blogger Nihil Dicit April 02, 2020 1:23 AM  

I don't think the banks are rubbing their hands with glee at the prospect of seizing assets of their borrowers. That's not what their incentive is.

Unless they can throw a TARP over said assets.

Blogger Akulkis April 02, 2020 7:59 PM  

@31

"I don't think the banks are rubbing their hands with glee at the prospect of seizing assets of their borrowers. That's not what their incentive is."

Really?

Because Jefferson called that play 220 years ago, in his warning that the greatest threat to the American public would never be a foreign power, but banks, manipulating the money supply and value to cause defaults, thereby causing lendees to have to surrender 100% of partially-paid for assets.

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