“The problem is trying to get qualified people to borrow”
March 27, 2009
” ‘The problem is trying to get qualified people to borrow,’ said Raymond P. Davis, president and chief executive of Umpqua Bank, a regional lender based in Portland.” NYTimes, A Downturn Wraps a City in Hesitance
This is a curious restatement of the credit problem.
Davis suggests that credit is no longer a problem of how to select creditworthy applicants (qualify people), nor is it a problem of collections and controlling default. Instead, the problem of credit is to get qualified people to take out loans. The activity is one of persuasion, not of selection and screening or of capital recovery.
Taken to its logical limits this could mean that the lack of lending is not because capital is no longer flowing, but because the people who are eligable for it are not borrowing enough. This would imply that economic stimulation could come from activating a segment of the population that qualifies for credit under the current policies and getting them to borrow…
I’m not sure what to make of this, but it struck me as odd and worthy of some thought.