Democrats push banks to keep lending system moving

Clearly it's a delicate balance, as the US is already in deep trouble due to lax lending standards. The problem today is that the banks now have the cash - they have also been receiving cut rate loans from the government for months as well - but they are still reluctant to loan. The longer the banks hold off lending the deeper the real estate problem will become. Senator Schumer is right to push back on the banks, though I really, really, really would like to see him step up on the compensation problem. There is no way $70 billion in bonuses should be handed out on Wall Street in this climate. No way at all.

The U.S. government in recent days has laid out a plan to inject $250 billion of capital into U.S. banks in exchange for preferred shares and some restrictions on executive pay. The program is part of a broader $700 billion market rescue plan Congress passed earlier this month.

Nine of the largest U.S. banks were essentially arm-twisted last week into signing on for the first $125 billion in capital infusions. The Treasury has set a deadline of Nov. 14 for other firms to apply and has said it has enough capital allocated for all qualifying firms to participate.

"This plan will only be effective if these funds are used to increase lending by banks, and it is Treasury's obligation to ensure that," said Schumer, who chairs the Joint Economic Committee. "The last thing these banks should be doing is stuffing this money under the proverbial mattress."

On a related note, I followed a conversation recently (in the US) where someone insisted that loans were still being made, but people had to arrive with a lot of cash. How was was a lot? Twenty percent. France had loosened up some of it's lending standards but in general the bulk of real estate loans require closer to 30% or 40% cash with 10-12 year terms. Others exist but they were still conservative by US standards and are now gone. The French bank loan system is hardly perfect or better, but what a difference. Even with the differences, loans in France have also locked up though I hear if you come with 99% cash, they will be happy to lend.