Banks take the safe options, but for some reason the media see this as good news.
Just as Robert Peston effectively broadcast Lord Manglesum’s every utterance as Gospel during 2009, the FT too has become so europhile of late, every spark in the EU igloo is greeted as a sure sign of economic warming.
‘Banks in the eurozone increased their lending to companies in November, reversing a drop the previous month and spurring hopes that the ongoing economic recovery will be buttressed by an extension of credit’, the Pink’un suggested this morning.
Large EU-based companies are doing exactly what their owners and counterparts in the UK are doing: grabbing the cheap money to invest it in short-term easy-profit stuff paying higher rates. Also the phrase ‘ongoing economic recovery’ is an assertion in search of substantiation.
“There is a string of companies that do not get banks loans at all – or only with unacceptable conditions,” said Josef Trischler, managing director of VDMA, the German engineering association. Too right: neurotic banks lend to safe bets – and to hell with the rest.
Tucked away at the bottom of the piece, the FT grudgingly admits that ‘one of the reasons for the slow extension of credit is that the private sector is awash with cash’.
Which does beg the question, why is the fact of nervous Normans lending to greedy Gerhardts a good sign?
The picture is similar in the States: plenty of money for the Biggies, none at all for the upcoming insurgents. Bloomberg notes that ‘More than $369 billion of loans were raised as of Dec. 28, led by financing for the purchase of Burger King Holdings’. That’ll be that little tiddler Burger King, then.
If all banks do is bankroll safe bets, there is no chance at all for genuine capitalism to develop…and to be honest, there’s no point in having merchant banks.