Why Banks Won't Loan & How to FIX IT

"http://online.barrons.com/article/up_and_down_wall_street_daily.html" "One other possible reason: ironically, the Federal Reserve's policy of holding the federal funds rate near zero. That allows banks to take money that costs them virtually nil and buy two-year Treasury notes at 0.55% and pocket that spread. Doesn't sound like much, but leverage it up 20 times and the bank earns 10% on risk-free... [more]

"http://online.barrons.com/article/up_and_down_wall_street_daily.html" "One other possible reason: ironically, the Federal Reserve's policy of holding the federal funds rate near zero. That allows banks to take money that costs them virtually nil and buy two-year Treasury notes at 0.55% and pocket that spread. Doesn't sound like much, but leverage it up 20 times and the bank earns 10% on risk-free U.S. government securities. Why bother with the hassle and capital cost of making loans if you can earn double-digit returns so easily? This notion came as a result of an off-hand comment by the head of the funding desk of a major bank, who observed that if the Fed raised the fed-funds rate, banks would be forced to invest in riskier assets. Such as making loans; imagine that." SO TIRED of the Fed Not Figuring This OUT. RAISE the FED FUNDS RATE. Or worse, the Fed does know, and we are all continuing to bail out the banks via our dropping home values. Take from the poor and make them poorer. Take from the rich and be called a Socialist. Give to the rich and be called a taxpayer. Typical. [less]