[Pen-l] What Congress forgot to ask the bankers

[Michael Perelman <michael@xxxxxxxxxxxxxxxxx>]

Yesterday when the bankers were telling Congress how much they have been lending, I 
don't know of anyone who asked them how much of these loans in response to 
pre-existing lines of credit.  One of the ways banks try to get fees is to collect 
interest on lines of credit -- money that they have not yet lent, but stand willing 
to lend in the future.  Banks are contractually obligated to fulfill these loans.

With credit tightening, many borrowers have taken advantage of these lines of credit.  
Doing so, they give the impression that banks are increasing their loans, but the 
arrangements for these loans, in effect, may have been made quite some time ago.
 -- 
Michael Perelman Economics Department California State University Chico, CA 95929

Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu
michaelperelman.wordpress.com
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