Friday, January 9, 2009

Do we need Tarp II and Tarp III?

Anecdotal evidence from American Apparel to natural gas pipeline operator El Paso Corp. suggest that banks are reluctant to lend. There are still plenty of problematic assets on banks' balance sheets.Big banks may face another wave of losses from credit cards, commercial real estate and traditional home mortgages. Credit losses will top $2 trillion, up from around $1 trillion today, according to Nouriel Roubini of New York University's Stern School of Business. Some are already calling for Tarp II and even Tarp III.

From BusinessWeek:
American Apparel (APP) executives should have been focused on the sales of their leggings and T-shirts this holiday season. Instead, management spent most of the critical shopping period worrying about $125 million of debt due on Dec. 19. After weeks of intense meetings with major banks, the trendy retailer landed a last-minute extension on a loan. The onerous strings: a $2.3 million fee and limits on capital spending. "The credit markets are still frozen," says Chief Financial Officer Adrian Kowalewski. "Even companies that are performing well can't get loans at reasonable terms."

....Despite all the government's best efforts in recent months, big banks still aren't lending money freely. One sign of the crunch: New loans to large companies slumped 37% in the three months ending Nov. 30 from the preceding three months. "Banks are being extremely cautious," says Edward Wedbush, chairman of the Los Angeles brokerage Wedbush Morgan Securities.

source: Why Banks Still Won't Lend
BusinessWeek, January 7, 2009

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