The document summarizes the state of the banking industry in 2011. It discusses that banks faced a liquidity and leverage crisis in the past that led to the TARP bailout. It notes that currently, banks vary in their health and recommends tools like the FDIC website and Google Alerts to evaluate banks. It predicts that tight credit conditions will continue but that SBA lending programs can help businesses obtain needed financing during the long recovery period.
8. How do I keep up with all of this? Texas Ratio Report, www.fdic.gov and Google Alerts
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14. Help yourself by becoming familiar with these programs. A large amount of current bank lending is through these programs
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Editor's Notes
Good evening. Thank you for having me tonight. Back in October 2008, Charlie Rose interviewed Warren Buffet as the financial rescue package was being signed. Mr. Buffet said that a great athlete (The US economy) was on the floor in cardiac arrest. Many of us in the financial markets didn’t see this coming or if we saw it coming it certainly didn’t think it would be this bad. It has caused me to go back and try to understand what was going in the economy to create this financial crisis. What I hope to convey is an understand that there was somewhat of a perfect storm of circumstances some of which have been going for some time, that led to our current crisis
In 1999, for example, Fannie Mae, the nation’s biggest underwriter of home mortgages, announced it was easing the credit requirements on loans that it would purchase from banks and other lenders. The purpose was to help increase home ownership among minorities and others whose incomes, credit ratings and savings were too low to qualify for conventional loans. Of course, Fannie Mae was taking on more risk. But Fannie Mae also was being pressured by the Clinton administration to help working-class home buyers. And the entire lending industry was being pressured to ease up on its consideration of income, credit history, down payment and closing costs in determining the creditworthiness of customers. Conservatives now want to place blame for today’s Wall Street collapse in former President Bill Clinton’s lap. Yet President George Bush also embraced the expansion of higher-risk home loans and in 2003 called for “the entire housing industry to help at least 5.5 million minority families become homeowners by the end of this decade.”
The volatility in housing markets and expansion of mortgage credit since 2000 - and the subsequent rise in delinquencies and foreclosures - undoubtedly explains a significant portion of the total rise in consumer debt. Home mortgages accounted for 69 percent of total household debt in 2000; at the start of 2009, the figure has risen to 76 percent. It would be impossible to completely extricate housing debt from the debt equation that American consumers are facing today. But even if we discount the great expansion of mortgage debt since 2000, the growth of non-mortgage consumer debt over the same period has still outpaced the growth of inflation, as well as the growth in consumer prices for food, housing, energy, and medical expenses. Credit card debt is at a historic high. Payday loan operations are flourishing. Students are acquiring high levels of debt well before they face the prospect of owning a house.