After the Bank Bailout, What’s Next?

Sunday, April 21st, 2013 By

Obama’s Landmark Initiative

The recession credit freeze is thawing. Will banks who deigned to borrow money repay those bailouts?

The recession credit freeze is thawing. Will banks who deigned to borrow money repay those bailouts?

A year ago, most of the banking industry was knocking on the doors of the federal government for a bailout to allow them stay afloat. As we know, the government obliged, pumping in billions of dollars of taxpayer money into these banks. Now that the situation seems to be improving and banks are looking to return some of the money provided by the government, President Obama has pressured them to become better lending facilities for those who are looking to borrow money against homes and businesses.

Are Banks Stronger Now?

Banks and Wall Street were standing in line, hats in hand for a bailout from the financial mess they found themselves in a year ago. Even as the government obliged with assistance at the time, it wasted no time in asking the banks to return the favor and take a step in helping rebuild the economy. Banks have been repaying the money that the government had provided out of taxpayers’ money, with the latest among these to do so being Citigroup and Wells Fargo. Citigroup’s announcement stated that they were ready to return $20 billion borrowed from the government set in motion a series of meetings leading to the current scenario.

Banks’ Strong Commitment

The President has sought assurances from these banks that they would look to serve the interests of the very people from whose money they had been bailed out. This statement certainly set the ball rolling. Bank of America has announced that it will increase lending to small business and homeowners by $5 billion over the next year, which will make people much happier knowing that their applications for borrowing money may be approved. Banks have also assured the President that they would look at all applications that had been denied over the past year. Better times are surely ahead for people with applications that had been denied, as well as for those who are ready to apply for a loan.

Lending Practices Tightened

Banks have assured the President that they would look to revive the economy, thereby keeping the commitment they made. Some banks have suggested plans for an improvement in unemployment figures, which are currently hovering at 10 percent, by looking to hire more people as well as extending their loan portfolios. However, they have also stated that they would look at lending practices and be more stringent with the requirements than they were a few years ago. They do this to make sure they are avoiding non-performing assets, such as what happened with the foreclosure fiasco. Banks are willing to lend to borrowers who qualify for the loans, but not without several procedures designed to keep them from needing another bailout.

Credit checks will be used without exception, as well as requiring more documentation to be provided. Difficult as this will be for some people to borrow money, it will keep bankers satisfied about the kind of loans they make, and it will keep in check the number of defaults that banks had to face prior to the bailout coming into play. Consumers who meet these stricter qualifications can look to borrow money from banks at reasonable interest rates in the coming days if all goes well.

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