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TARP Funds - Are banks lending out the money?
TARP is an abbreviation for the Troubled Asset Relief Program which is the largest part of the U.S. so-called "$700 billion bailout plan". Which banks are getting the funds? and are they lending out the money? From borrowers on the street desperate for loans the answer is NO, at least not yet. Then where is the money going?
Banks are using the TARP funds to stabilize their balance sheets in the face of increased loses. Bank loses have resulted not only from bad loans, but precipitated by the mark-to-marketing accounting rules which requires banks to report losses on the value of their marketable securities, causing their earnings, balance sheets and stock prices to fall. TARP funds are intended to improve the liquidity of these banks. The theory behind the injection of capital by the Fed is to allow banks to improve and maintain their capital requirements so they can make loans. However, the Fed has no way to enforce Banks to lend, so until Banks believe that their loses have been mitigated they most likely will hunker down preserving capital in case of future write downs. Time will tell, but for now bank loans are scarce.
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Why Banks Still Won't Lend
by Mara Der Hovanesian and Christopher Palmeri
Friday, January 9, 2009 provided by Business Week
Despite more than $1 trillion in federal largesse, they still may not have the capital cushions to bear the risks of making fresh loans.
American Apparel executives should have been focused on the sales of their leggings and T-shirts this holiday season. Instead, management spent most of the critical shopping period worrying about $125 million of debt due on Dec. 19. After weeks of intense meetings with major banks, the trendy retailer landed a last-minute extension on a loan. The onerous strings: a $2.3 million fee and limits on capital spending. "The credit markets are still frozen," says Chief Financial Officer Adrian Kowalewski. "Even companies that are performing well can't get loans at reasonable terms."
Click to see rest of this article
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Learning to practice "Urgent Patience"
False urgency equals busyness: It's stressful, exhausting and unproductive. True urgency feels powerful: It's relentless, steady and purposeful.
To sort out the truly urgent from mere distractions and get on with it, John Kotter, author of A Sense of Urgency, offers these four practical suggestions.
1. Bring the real world inside. That means using every possible lever from the outside world- data, customers, video clips, whatever- to drive your enterprise.
2. Conduct yourself with a sense of urgency, not anxiety or anger.
3. Look past looming crises so you can pinpoint opportunities. Fear can transfix even bright and brash people. Mobilize them to act.
4. Sideline the naysayers. These are the people who don't care and just want to be left alone in their complacancy.
Kotter advocates "urgent patience," or acting with firmness of purpose, not frenzy, while keeping a realistic view of time. He explains, "It means recognizing that five years may be needed to attain important and ambitious goals, and yet coming to work each day committed to finding every opportunity to make progress towards those goals." It's the attitude that helped Toyota transform itself into the No. 1 carmaker in the world.
Adapted from a Sense of Urgency, John Kotter, Harvard Business School Press.
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Cornerstone Commercial Mortgage specializes in commercial real estate finance. We act as mortgage consultants, focusing on providing the appropriate financing solutions for each client.
Contact John Lloyd at 702-379-3468 or
619-293-3919 E-mail - John.lloyd@cmlv.net
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