Bankers are telling me they’re in a stall because they’re afraid to lend ahead of Fed examinations. They have no clear guidance on what regulators consider a good loan. If they had such guidance, they would increase lending!

Raw land, for example, is often being written down to zero on the books – causing many banks to have to take a charge. Why can’t these type of changes be done over an extended period of time with an amortization process? It’s hard to drive a campaign for deposits when you are afraid to lend the money out on the other side.

Furthermore, to attract some nice deposits you have to pay out more than you can go to the Fed window for, thus increasing your coverage costs, etc. Community banks who are in good financial shape have the ability to raise capital and lend, but need the feds to provide clear and sustainable guidance for them to gain comfort in doing so.