I think that line is attributed to Ronald Reagan’s impressive debate performance against Jimmy Carter in 1980 … but just the same, it applies to the stream of recent articles about business lending in the middle market.
The WSJ discusses a report that banks have eased their credit standards in recent months. Of course, there’s no metrics to confirm that, or what it means … and you’ll waste a lot of energy finding middle market businesses that concur. More realistically, there is little demand for credit because businesses have little confidence in economic growth in the near term.
I don’t agree that “the divide between lenders and borrowers is a big stumbling block to a recovery” since bank borrowing is more like the dining car than the engine of economic growth: they’ll only eat if they’re hungry … not just because you’re serving dinner.
bank borrowing is more like the dining car than the engine of economic growth: they’ll only eat if they’re hungry … not just because you’re serving dinner.
Just as with job creation thinking inside the Beltway, companies don’t start hiring because they can save the cost of payroll tax or get a 2% reduction in their corporate income tax rate. They’re borrowing to respond to growth and these days, only when it’s both visible and predictable.
Remember that banks are not an eleemosynary institution. Don’t meet these standards? No borrowing. Period … and, according to the NFIB, only 4% of small businesses reported that financing was holding back their plans anyway. Uncertainty is the killer and until that behemoth is slaughtered, don’t run down to your bank expecting to grab some easy money. Ain’t gonna happen.