Picture of the Day: Stop Blaming Banks for the Terrible Economy

For the better part of two years, there's been a constant grumble that big banks like Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) are holding credit back from companies, particularly small businesses, and that's why the economy can't get moving.

This picture, from the National Federation of Independent Business' "Small Business Trends" report, might put that grumble to rest:

Source: NFIB.

Source: NFIB.

The ability to obtain credit is actually the least of small businesses' worries these days. Literally. According to this data, interest rates and finance is less a challenge than labor quality, which is incredible given the available pool of the eager unemployed.

The NFIB's report goes on: "Overall, 91 percent of the owners reported all their credit needs met or they did not want to borrow, unchanged from July. Only four percent cited financing as their top business problem."

What's fascinating about this survey is that it included only small businesses. It's well-known that large corporations have almost dangerously easy access to credit these days. Recently, Johnson & Johnson (NYSE: JNJ  ) and IBM (NYSE: IBM  ) both priced bond offerings at interest rates that basically round to zero, showing how easy it is to borrow. Apparently, small businesses are just as taken care of.

Banks aren't killing the economy. The problem is that businesses don't seem to want to borrow. As Warren Buffett said yesterday, "I know Wells Fargo, they would love to have $50 billion more of loans now. Go in and talk to the banker."

Fool contributor Morgan Housel owns shares of Johnson & Johnson. Johnson & Johnson is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson. The Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 14, 2010, at 5:57 PM, wasmick wrote:

    Can't we just blame them anyway? I'm not smart enough to understand anything other than my irrational hatred and the sharp end of my pitchfork.

  • Report this Comment On September 14, 2010, at 6:06 PM, Stonewashed wrote:

    How about banks and big business just paying their bills to small business?

    You are right, in that the problem is not that small business can't get loans. The problem is they are not at all enthusiastic about being forced into getting loans by the very ones who owe them money.

  • Report this Comment On September 15, 2010, at 12:56 AM, kenfwtx wrote:

    Placing blame doesn't solve problems.

    Businesses don't want to spend or borrow, because there is so much uncertainty from this current administration. They don't know what their health care, energy or tax costs will be in the coming years. Small business owners don't have the luxury of making mistakes or receiving a bail out by the government.

    In-, De-, Stag-, (flation), pick your poison. The Federal Reserve is the problem. Gold did pretty well today. Trust has been compromised.

  • Report this Comment On September 15, 2010, at 10:40 AM, rhutmacher wrote:

    Well said kenfwtx, businesses are hesitant to borrow simply because they don't know what the future holds. Look at what the number one fear has been for 20 years; taxes. If a business is worried that their tax bill could jump another percent or two in any given year, they are more hesitant to spend those future tax dollars elsewhere.

    Also, the Fed should take a big part in responsibility for businesses not wanting to borrow or invest. With all of the money that is flooding into the economy from the Fed, inflation is sure to come. With inflation comes higher prices, and businesses aren't sure if higher revenue will come to compensate for those higher prices.

    Stable money supply=stable prices=stable economy

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