The banks are not lending and that's killing the US economy and any chance of recovery. Look at the data! Despite reports about signs of recovery, the picture is not looking good at all with small business bankruptcies around the US up 44% according to Equifax and by an an astonishing 81% in California.
Rising unemployment means that consumers are cutting back on spending. At the same time, banks are reluctant to lend money and that's driving businesses to the wall.
This will inevitably flow through to other sectors of the economy. We can expect mortgage delinquencies to keep rising. As reported here, mortgage delinquencies are already at a record high with 7.91% being at least 30 days late on payments in November, up from 7.76% in October. And mortgage delinquencies are an indication of future bankruptcy filings.
This situation will not be fixed until the banks start lending again. As Treasury Secretary Timothy Geithner told NPR, the banks are preventing any chance of recovery. "Right now, the real risk we face is that banks are not lending enough and not going to provide the capital businesses need to grow for the economy to strengthen going forward," Geithner said.
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