I think QE was less about manipulating the interest rate and more about giving banks another avenue to get cash for assets and therefore have more capacity to lend. Even with reduced interest rates through ordinary open market operations, banks aren’t obligated to lend to anyone, and if they see opportunities to own assets they consider more attractive than a loan (with its paltry ROI), they buy (even when those assets turn out to be crap, the risk was worth it compared to “boring banking”). The Fed had to find a way around that, so QE was ramped up - get assets off the books of banks to help give another reason/opportunity for banks to lend.
I think you’re right about open market operations (broadly defined) being about the only lever the Fed has, but that doesn’t cut against its usage.
But try as it might, the Fed cannot manufacture demand in the economy. It can lower the price of fueling it, but cannot create it where it doesn’t exist.
Getting a peak behind the curtain, banks have been under tremendous pressure to make loans to minorities, even if a bad risk, although apparently this is supposed to decrease under Trump.
The way it works is banks are forced to take up self-reported demographic to the OCC. If a certain (unknown) percentage is not minority, they come down on you like hell and examine you to the point of shutting you down, even if nothing is going on.
The takeaway from this is, as a borrower, to self-report yourself as whatever minority you want. It helps the bank and makes you a much more valuable customer if you perform, so you get better terms.
I am 100% serious in this. Go full Senator Warren on this, especially for a business loan. I encourage you.
Quick disclaimer. Not sure if the above applies to business loans, but it more or less doesn’t apply in the residential mortgage industry. You’re much much much more likely to get audited by lending to an ABOVE avg % of minorities than below it.
My wife and I co-owned our business. When we put her name first on our business line of credit we got a 1.5% break on the interest rate and access to $50k more, because she is a “minority” being a woman (she is liquid paper white with her Irish heritage).
He’s referring to the mid to late 90s and early 2000’s where the CRA pushed banks hard to not only end “red-lining”, but loan to bad risks. Because as we all know “home ownership” is a great idea for everyone.
If you don’t mind me asking, what does that shake out to proportionally? 1.5% feels like a MASSIVE advantage compared to the interest rates I’m used to seeing.
Thank god we learned so guud from all dem mistakes. Right '07?
Let’s not get into “lessons learned” from the financial crisis or this thread will be partisan ruined real quick. Suffice it to say that government, banks, insurance companies, mortgage brokers, real estate brokers, consumers, markets etc… all combined forces in a perfect storm of stupid. I don’t think anyone learned anything to be honest.
I forget the exact terms. You’ll have to remember that we were a risky small business with <10 year track record before we bought it and only $500k/year in sales. I think the going SBA rate at that credit union was 5.5% at the time and they gave us 4% because we put her name first.
I don’t think '07 is “on” either party. I think it’s a natural byproduct of human nature and a lack of common sense. Humanity does really stupid shit (re: negatively impacting the masses) if the masses doesn’t elect to keep it in check.
That still equates to what? like a 25%ish drop in rate? That’s pretty insane.
I’m realizing now it looks like I said “Dem” mistakes as in democrats. I meant this in country bumpkin speech slang.
No, I am referring to 2017 commercial loans for energy-related companies. There is a ton of pressure to loan to “WMOB” (women and minority owned businesses).
And while I am a decent-sized stakeholder in this bank, a large client over the years, and know who-will-pay-you-back and who-will-not in the oilfield, it didn’t hurt they got to check the box of a minority board member.
That has nothing to do with being a “minority” - women are somewhat more responsible borrowers and exhibit less propensity to default when it comes to loans/mortgages.
This is pretty much consistent in every non-Islamic country all over the world
True. But in the US, for lending purposes… women owned businesses are “minority owned businesses” and get special rates and access to banking products that a white male owned business would not.
It sure doesn’t hurt being able to check off that minority box. When a company is looking to can people, being a minority and in good standing certainly helps my case.
Maybe I should start a business. I am a minority and the tax rates for small business should be getting cut with passage of this tax bill, it may be time to stretch my wings…
What to do? Too many gyms in my area to justify that. Liability on ‘do-it yourself’ garages are a little high even with a waver signed… Love to run a custom car shop, don’t think I could secure that kind of loan though.
I guess I am stuck with drug dealer, male prostitute, or pimp.
Two contrarian books I would recommend reading before starting any small business:
10X Rule
Profits aren’t everything, they’re the only thing
Startup business is really cut-throat. There is really no room for error when you aren’t even cashflowing yet. Working for a big established business just doesn’t prepare you for how close to insolvent you always are trying to boot strap a business. You need to be nimble, decisive and ruthless.
Always remember to treat your business like a business. Take a big step back and ask yourself if you’d invest in the venture as a disinterested 3rd party.