Finance, Forex and Investments

Why is it today that commercial banks are having problems giving credit?

Public Comments

1. They are running out of money and cannot get credit themselves.
2. it's not that they don't have the money , they just wanna be careful who they give it too. like higher class and not middle class or lower class
3. They don't have money to lend. Plus they are afraid they wont get their money back cause of the bad economy.
4. They have been giving out credit too easily and got burned! Take a look at some of the posts here, ""I am deep in credit card debt , how do I get out of it. " or, " I owe a lot of money, can I declare bankruptcy?" It isn't that they are having problems giving out credit, it's those with a poor credit history are having problems getting credit. Try buying a car.. Have a great credit rating and 20% down, you can get a loan. Try having a poor credit history and no money down, see what happens.
5. the mounting losses from mortgage defaults have caused many banks to tighten their grip on their cash, to literally strangling the funds. they have the cash but are attempting to minimize any further losses. you've seen several big banks fail. how long can one bank go on losing money quarter after quarter? these "pick-a-payment" creative mortgages and giving credit for those who haven't proved they deserve it have ignited this mess with the banks. costs of funds are also rising as many banks borrow money to lend out, so if they have to pay more for the money they borrow that they lend to the consumer, they either increase rates or don't lend as much, or both. many banks are pursuing quality of their loans over quantity in order to protect their behinds. so that makes qualifying for a loan that much more difficult compared to prior times when banks gave credit to just about anyone who applied.
6. Because the wave of bad loans continues to flow in. Every day, more loans going bad.