The Fed's Moves Have Backfired - Barrons.com
"...Translated from Fed speak, lower long-term rates will make borrowers more willing to borrow while lenders will be more eager to lend.
But, Hunt points out, ultra-low interest rates could have the opposite effect. To earn a profit, banks have to cover their costs, from payroll, overhead, taxes and "elevated" fees to the Federal Deposit Insurance Corp. Then they have to earn a spread to compensate for the risk the borrower could default. At very low interest rates, there aren't enough basis points left to lend profitably. The historical precedent is Japan, where banks would rather buy government bonds than make loans."
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment