Banks Gambling with Our Lives Again

Once again we find banks gambling—taking risks at the expense of the public.

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Because 2008-09 was so much fun… let’s do it, again!!

Hey, aren’t you glad John Boehner and his buddies passed that $1.1-trillion spending bill, which also reportedly included a gift to the biggest banks, allowing them to place their riskiest financial casino bets under the protection of government guarantees?

Now, they’re back to their old tricks in the lending game, too, because they’ve learned all so well that when they win, the bonuses are huge, and when they lose the taxpayers get the bill—such a deal!

Thus the L.A. Times reports, “Banks loosen lending standards to levels seen before financial crisis.”

The largest U.S. banks have lowered their standards for some of the riskiest lending in a sign that weak underwriting is returning to levels seen before the 2008 financial crisis, according to a regulator’s report.

The banks have continued to erode standards, especially in large corporate loans, consumer loans and in leveraged lending, according to an annual Office of the Comptroller of the Currency survey of examiners released Tuesday. Leveraged lending is the risky financing often used to fund corporate buyouts.

“As banks continue to reach for volume and yield to improve margins and compete for limited loan demand, supervisors will focus on banks’ efforts to maintain prudent underwriting standards,” said Jennifer Kelly, the OCC’s chief national bank examiner. She said the trends are “very similar” to those from 2004 through 2006.

The annual survey looked at 91 of the largest banks with loan portfolios amounting to about $4.9 trillion, or 94% of loans in the federal banking system. The report predicted that credit risk will continue to increase in 2015.

The OCC advised senior bank managers and boards to carefully consider whether their aggressive underwriting is appropriate.

Last month, the OCC and other banking regulators released a joint report warning of serious deficiencies in leveraged lending. The agencies promised more scrutiny.

Thanks, Congress!! Thanks, big-time bankers!! You are living, breathing examples of those Alfred referred to in The Dark Knight: “Some men just want to watch the world burn.”