Because a credit crunch was started after the financial crisis, Wall Street banking institutions are getting some grief. There is no lending coming from the major United States of America institutions. This is only a problem because they took millions in government bailout. Financial institution executives at the White House were confronted by President Obama last week who said we need to be financing more to small businesses. One of the ideas suggested was to take a “second look” at loan applications. The second look programs are what came out of that. Numerous U.S. financial institutions have begun working with it. Nine months later, you will find signs that a 2nd look may be making a difference.
Just a little bit more traction for second look
The President challenged Wall Street financial institutions to take a second take a look at lending after his December meeting. He went a bit further than that. The Associated Press reported on the meeting. Evidently Obama wants to increase small building by asking banks to “explore each possible way” to do it. He also thinks that they have to take a “third and fourth look” along with the second look. Richard Davis said he’d present the idea to the Financial Services Roundtable as the chairman of the group. He is also the United States of America Bancorp CEO.
Lending the way we used to
Nine months later, the Financial Services Roundtable states nearly all its members have second-look programs. Members consist of Financial institution of The United States Corp., J.P. Morgan Chase and Co., PNC Financial Services Group Inc. and United States Bancorp. The Wall Street Journal reports that second look programs are a throwback to good old-fashioned loan underwriting. Instead of automated analysis of credit scores and other data that drove the industry when credit was easy and cheap, now banks are taking into consideration a borrower’s track record and relationship with them. Financial institutions are doing everything they can to make people look worthy of loans. This consists of asking about unreported sources of income along with asking about credit report errors. The Journal said the second look program may be having an impact. There has been the first easing of lending standards since 2006 reports the Federal Reserve survey of senior loan officers that was done last month.
Worth a second look
Instead of avoiding risk, banking institutions are using the program as a business opportunity with 2nd looks. PR purposes is the reason why Alan Sherter from bNET thinks financial institutions are doing the second look program. It isn’t at all for risk in lending. The joblessness rate is unlikely to get any better with the small business loans that probably won’t make the companies boom. The second look may be great for a small local business that wants to just survive the economic recession and hopes to increase one day.
Associated Press
msnbc.msn.com/id/34416646/ns/business-us_business/
Wall Street Journal
online.wsj.com/article/SB10001424052748704062804575510302866961116.html
bNET
bnet.com/blog/financial-business/due-credit-banks-offer-second-chance-to-small-businesses-rejected-for-a-loan/7715
