Are Banks going to choke off any possible chance of an economic recovery?

[Silverbird]

Summary of the article: Banks are restraining the issuance of loans to growing businesses. Even financially sound companies are being deprived of loans for expansion and hiring. The Fed just reported the largest annual decline in commercial/industrial loans since 2001.

http://www.stocktiming.com/Monday-DailyMarketUpdate.htm

I agree with his analysis of the problem, so it's good reading. However, he doesn't come up with any ideas on how the Fed or the rest of the Govt is supposed to "fix" this problem (I am not going to get into moral hazard because that's a completely different worm can). The Fed has lowered rates to the point of contributing to the fall of the dollar. They have opened a loan window for the banks. So, grain of salt.

 

[luv2read]

Answer to thread title: Yes. Banks are doing their damndest to choke it off while BA continues the smoke and mirrors of "supply and demand." Banks and the oil companies themselves are the primary speculators causing wild fluctuations in the oil market - not day traders and those who actually USE the oil.

Bill to curb speculation moves forward
By Bloomberg News | July 23, 2008
WASHINGTON - Senate Democrats cleared the first hurdle yesterday for legislation that aims to curb speculation in energy markets in response to record prices.
The motion to go ahead with debate was approved 94 to 0, and the legislation requires another vote before it clears the Senate. Democrats said the measure could reduce oil prices as much as 50 percent. Oil hit a record $147.27 a barrel on July 11.
The legislation "should immediately and sustainably lower prices," said Senate Majority Leader Harry Reid of Nevada, the main sponsor. While curbing speculation is "not a panacea," Reid said, "there's no doubt it's a major part of the problem."
Reid's legislation requires the Commodity Futures Trading Commission to impose limits on speculative trading in oil and natural gas futures markets. It also requires more reporting in energy markets to prevent market manipulation.
Senate Republicans contend the measure should do more to tackle high energy prices, including expanding offshore drilling, as called for by President Bush.
"The American people will not accept a timid approach to such a major problem," said Senator Mitch McConnell of Kentucky, the highest-ranking Republican in the Senate. "This is the biggest issue in the country right now, by far."
White House spokeswoman Dana Perino said the administration wants Democrats to allow amendments to the measure that would expand oil supplies.
"Speculation does cause some volatility in day-to-day market fluctuations of oil prices," Perino told reporters. "We believe that the root cause of high energy prices is supply and demand."
The unanimity of the vote was "surprising," given opposition from major banks to the proposal, said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Mass.
"It will make the market more transparent, which is a good first step," Emerson said. "There doesn't appear to be anything in the legislation that is so onerous that it would hurt the futures market."

 

[luv2read]

"Big Wall Street firms representing the interests of pension funds, endowments and wealthy individuals around the country have grown in just a few years from minor participants in the oil markets to their most dominant force," the Washington Post reports. "These financial firms -- whose holdings of oil contracts are now larger than the collective demand of airlines, trucking firms and other companies that need oil to run their businesses -- have become the focus of an intense debate in Washington over whether their exponential growth is contributing to the surge in oil prices."

from govexec.com

 

[EEK! 5 YEARS TO GO!]

For years the USA was blamed for being an energy hog. Now that we're using less because of the cost....let's blame China.

"From Mexico to India to China, governments fearful of inflation and street protests are heavily subsidizing energy prices, particularly for diesel fuel. But the subsidies -- estimated at $40 billion this year in China alone -- are also removing much of the incentive to conserve fuel," the New York Times reports. "The oil company BP, known for thorough statistical analysis of energy markets, estimates that countries with subsidies accounted for 96 percent of the world's increase in oil use last year -- growth that has helped drive prices to record levels."
"Car ownership in China is exploding, and it's not only cars but also sport-utility vehicles, pickup trucks and other gas-guzzling rides," the Washington Post reports. "Indeed, China's demand for gas is much of the reason for the dramatic run-up in global oil prices."
"In the wake of a decades-long manufacturing exodus overseas, the climbing cost of outsourcing has some U.S. companies looking homeward," the Washington Times reports. "The gap between the cost to produce goods in the United States or to produce them abroad has narrowed, thanks to a decrease in China's competitive advantage."

 

[Silverbird]

Whoo hoo! Passing investment financing laws? Oh my. That's what the banks and Wall street get for contining to whine and play dead after the Fed's cut interest rates, opened a financing window, AND bailed out Bear Sterns. "The beatings will commence until morale improves"!:nuts: