Wednesday, Aug 26, 2009
Direct lending
The Telegraph: German state to lend directly as second credit crunch looms
Germany could directly intervene in the credit insurance and lending markets as soon as September to head off a looming credit crunch, as it fears the economic recovery may soon falter as banks refuse to roll over loans.
"The banks are not stepping up to their responsibility to provide credit," he told the German paper Handelsblatt.
Among likely measures are use of the state-bank KFW to make "global loans" to industry on terms that pass on the full benefit of lower interest rates, as well state aid for credit insurance and trade finance.
Mr Steinbrück said markets are awash with liquidity again, but little is going into the real economy. After two years of financial crisis the gambler mentality is gaining the upper hand again.
Posted by devo @ 07:38 PM (620 views) Add Comment
8 Comments
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1. devo said...
Strange, I hadn't noticed that the first credit crunch had ended.
2. mark said...
i dont get it, germany is ok now! it is in fact booming with confidence....
3. tyrellcorporation said...
Oh Gawd, Gordon will be looking at this with a glint in his eye (pun intended).
'I will not walk on by' blah, blah, blah...
4. mountain goat said...
"The banks are not stepping up to their responsibility to provide credit," he told the German paper Handelsblatt.
Not like in China where banks do as they are told and a big fat bubble is developing. "Money supply therefore shot up 28.5 percent in June."
5. growler said...
... except that in the UK, if we were to make such loans to industry - our credit rating couldn't survive the risk assessment nor the markets stomach the amount of additional debt we'd have to sell to create the borrowed cash to lend. This is where we find out just how "robust" the UK economy is and how able it is to come out of recession.
6. growler said...
Funny - that's what I was saying the other day...
""The banks evidently prefer to put their money into securities rather then granting new loans because they can get a higher return. After two years of financial crisis the gambler mentality is gaining the upper hand again."
7. icarus said...
Direct lending by the state? Er...so tell me again why we needed bank bailouts to get credit flowing into the real economy? (Not that I think that will work either.)
growler @6 - yep, churning old IOUs is less risky and more profitable than making fresh loans. Distressed bonds are quite profitable since there are fewer investment banks buying them (less competition among buyers). And big companies raise capital on the bond markets - another earner for the banks.
8. europeanbear said...
No German banks along with Austrian banks and some Scandanavian banks are is deep doo-doo. They leant heavily to Eastern European markets fueling a property bubble every bit as big and unsustainable as that in the USA. Now that markets have turned south everywhere from Estonia to Rumania, Poland to Bulgaria they have a major problem. Eastern Europe is the subprime of continental Europe and the banks are probably trying to preserve what is left of their balance sheets to survive.....so lending is out of the question right now