Banks win, you lose

Have you tried to borrow money lately from a bank? They want your credit to be downright impeccable; even then, it is likely that you will pay fairly robust interest.

Automobile loans are different. If you miss a few payments, the bank will hire a repo guy or gal to steal the car back; then the bank will resell it and maybe book a slight loss or a slight gain. Houses used to be different, but mortgages are not as easy as before the Credit Debacle. Banks are hip now to the fact that real estate can actually decline in value.

But here’s the real skinny on banks: They can borrow money at the Fed’s discount window for next to nothing — the current rate is 0.75%, or 3/4 of one percent. Then the banks turn around and loan the money out at 6 or 7%. In honest days, institutions could make maybe 2% on the spread between what they loaned out and what they credited to savers. Now? Holy mackerel! Do the math. That’s a lot of interest.

Banks are not doing a great job of lending to stimulate the economy or create jobs. Many of them seem to be lending to the highly creditworthy at high rates and paying themselves bonuses out of the nice high spreads. Banks are certainly not paying out high interest yields on savings accounts and certificates of disappointment.