Donald Trump says it's time to force banks to start lending

Posted Dec 1st 2009 5:00PM by Zac Bissonnette
Filed under: Housing

In an appearance on CNBC today, Donald Trump argued that it's time for the federal government to step in and force banks to lend. "Banks are not lending money, no matter how prime you are," Trump said. "The economy can't come back until the banks start lending."

"I don't think any bank in this country is soliciting loans," he added "Banks are bragging about the fact that they're making loans and they're not making loans."

Trump said that "the Manhattan market really has not been hit like the rest of the universe" and complained that it's impossible to get commercial loans even with A-list tenants already set up. "There are loans that are backed up by fantastic Fortune 500 companies, and they still won't lend."

The problem is that Trump's argument for forcing bank to make loans that they don't think are prudent conflicts with the lessons that have been learned from the collapse of the bubble in the first place. Back in October, American Enterprise Institute senior fellow Peter J. Wallison explained how socially-motivated lending (as opposed to banks deciding what loans they want to make) led to the subprime crisis. Lending standards should be set by risk management, not by politically motivated directives from Washington.

If banks thought that the loan applications they were rejecting presented a favorable opportunity, they wouldn't be rejecting them.

Maybe Donald is just hurt that Trump Entertainment Resorts wasn't able to get a loan before it filed for bankruptcy for the third time.

Tags: american enterprise institute, AmericanEnterpriseInstitute, banks, Donald Trump, DonaldTrump, lending

Print this

Reader Comments (Page 1 of 1)

12-01-2009 @ 5:40PM

Ann Velazquez said...

Donald is right. I'm a car dealer and it is impossible to get or give loans through the banks. Wachovia wants to double my rates, in a time when rates have gone down and they want short term loans 12-16 months vs/ the old standard of 60 months.

12-01-2009 @ 6:24PM

william lindblad said...

If banks thought that the loan applications they were rejecting presented a favorable opportunity, they wouldn't be rejecting them.

Zac, you really should review your own statement.

Trump may have been speaking in general terms, but he is nonetheless correct. The entire banking system is not making PRUDENT loans, like in conservative with collateral and a reasonably good chance of repayment. The ones that thy are making are at much lower initial levels - i.e., if a business asks for 500K they might get 300K approved and yet be an excellent risk for the initial amount. It is easier to borrow government money at rates below government bonds and than buy bonds. Easy money at taxpayer expense.
All about policy, a policy with no legal means to change. There is a certain irony to our economic mess and that is the bankers caused it - and now they perpetuate it.

12-01-2009 @ 9:48PM

katgod2002 said...

Donald is not a good risk so it is no surprise that he can't get a loan. We got in this mess by giving loans to anyone who wanted one.

12-01-2009 @ 10:00PM

Donovan said...

It seems the Government has no control over the banks at all. Its more the banks have control over the Government.

Now just perhaps, if a few million people (we the people) stopped making payments to the banks. (credit card issuers) we the people/consumers, just might have a bit more influence on the banks then our Government seems to have.

Theres power in numbers. And if millions of people just stop paying their credit card bills. The banks will get the message (we the people send) real fast. We need to pick a month to protest the banks.