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FDIC Chairman Bair Says Big Banks Still Aren't Lending Enough

The head of the Federal Deposit Insurance Corporation (FDIC) says she's "very worried" that the nation's biggest banks aren't lending enough and warned the economy...
November 17, 2009

The head of the Federal Deposit Insurance Corporation (FDIC) says she's "very worried" that the nation's biggest banks aren't lending enough and warned the economy could take another turn for the worse without increased access to credit. Chairman Sheila Bair said the FDIC's upcoming quarterly report would show that "not many large institutions are doing a very good job of lending." Instead, she said, some are taking advantage of near-zero interest rates by borrowing dollars cheaply to buy higher-yielding assets like stocks or commodities, a move known as the "carry trade."

The lack of lending by large banks is dangerous at a time when many small and midsize banks are teetering on the brink amid the economic downturn, Bair said. "I don't see much money going out (from banks). I see a lot of carry trade," Bair told a banking conference in New York. "It used to be you take deposits and you lend out money. We'd like to see more of that."

"I'm very worried (that) the larger institutions don't seem like they're stepping up to the plate providing credit," Bair said. "Because if they don't do that, we're all in the soup."

FDIC Boss: Big Banks Still Not Lending Enough (FinReg21 11/12/09)