International Law

A Big Banker Speaks Out

Image by swisscan via Flickr

Here is lead about banking skills., from Joe Nocera's column.

"I've been a lender for most of those years and I've been appalled at the changes in the industry.

The government has already done plenty for the big banks. It needs to stop worrying about them now. Instead, it need to pump money into the local community banks because those are the bankers who understand their markets, and know the businesses in their markets. They lunch with small business owners at Rotary Clubs and Chamber meetings. They learn, first-hand, about their businesses and the challenges they face. They go to their stores and factories and "kick the boxes." And most importantly, they learn about the ways in which those business owners are making the tough decisions in cutting back expenses to stay ahead of this economic crisis.

Big banks like the one I work for typically have an aversion to lending to companies whose sales and profitability trends are deteriorating, even in tough times like these. Thus, very credit-worthy businesses are having their lines cut back or closed down. Not only are banks not making new loans, they are systematically withdrawing from the loan commitments they already have in place."

Here is a little test for prospective bankers. How much would you pay for the this lottery ticket: a coin is flipped until a head turns up. Say it takes n turns before a head turns up. The lottery pays $2**n. For example, if the head turns up after three turns, n =3, then the pay off is $8, after 10 turns, the payoff is, n = 10, $1024? So how much you pay for right to participate in this lottery? Answer, tomorrow. And yes, do google "St. Petersburgh paradox".

Full post as published by Misleading Advertising Law on October 30, 2008 (boomark / email).