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Well it is the great credit debate is -- a lack of cash or is -- -- lack of good borrowers the senate expected to vote in favor spending thirty million more dollars to fund a small business lending fund.
But is anything going to help as more borrowers default on their loans and banks get more nervous.
It's -- is managing capital insight.
Partners the start that you very much for joining us.
What is the answer or doesn't like so many things lie in the middle between lack of credit and lack of credit worthy borrow.
Thank you for having me I think that the primary problem is lack of of credible borrowers -- creditworthy borrowers.
That's the number one issue there's no lack of cash.
In the industry the industry is awash in liquidity.
Today both consumers and businesses big companies you know have been building up their liquidity basis and all that money is floating through the banking system.
The problem has been the lack of credit worthiness among the borrowers and there's been a significant.
Deterioration in credit worthiness in -- because of declining asset values.
Reduced cash flows and earnings.
Personal guarantees that -- work very much anymore.
And this program you know will primarily.
Shift is it doesn't improve.
The credit worthiness of any of the borrowers it just shifts the risk.
Of the credit from the banking system you know to the taxpayer -- the meeting -- to the government and the taxpayer.
So at the end of the day -- -- do you think it's it's it's starting billion goes through and is used to make loans that.
We're dumping it down a hole so to speak because the money will be went to people who don't deserve a lot or are worthy of.
Well I think it -- you know it it will have an aspect of that absolutely.
That at the end of the day you know some of those borrowers you know there already are a number of government programs like the Small Business Administration.
Most of these borrowers wouldn't qualify.
Under the SBA criteria.
You know therefore you are dealing with a more you know credit.
Risky customer and at the end and the net result of that is that there are going to be losses and you know what we're just shifting those losses around the money of these businesses need equity they don't really need more debt piled on top of them.
You big banks that'll make.
If they've got government money back -- if it was just their private capital will the loss ratio be higher for these loans -- purely private market loans.
I would suspect so yes -- when you shift the risk off of my shoulders to someone else's shoulders.
You know your underwriting criteria -- will become a little looser.
And so you know to sound a lot -- have -- and -- to me to be honest.
On a smaller scale.
-- -- on a much smaller scale.
And a much smaller scale -- -- have some of those attributes.
That you know you'll be making more and more loans at the margin of credit worthiness and some of them will be on the margin of creditworthiness so there will be.
You know enhance losses but the banks will participate.
Because -- you know to be structured in a way that you know they can earn fees -- they can you know generate some some profits from it and the risk will primarily resides.
With the taxpayer.
Did this congress and do our lawmakers need to look at what they're doing and the big picture in terms of what they're doing to help.
Small businesses -- -- they want to push through this thirty billion dollars in loan funding.
But then at the same time they're talking about read the administration's talking about raising taxes on high in com.
Individuals and small businesses in this country so for everything they do that might be a positive.
What about the negative than a business is facing.
I think that's true and there you know and and you just did peace and a few minutes ago on in a new financial regulation there's going to be a lot of regulations flowing out of there.
Many of which are going to restrict credit.
-- that you know the documentation.
And the criteria underlying credit so you've got all of these conflicts going on.
You know with within.
You know the business sector as to which way are we going.
You know one hand you know people are.
In wanting to put their foot to the you know pedal to the battle and on the other hand people -- wanting to hit the brakes.
And so the cars just jerking along down the road so to speak.
It's dark gonna leave it there -- managing director for capital insight partners -- it was a pleasure thank you very much for coming on the program thank you for having me and care.
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