It appears as if banks want to have everything their own way. Despite lending more than a billion dollars to the cash advance industry, they still speak out against it whenever possible. Surely they realize that their own inaction is what drives the short-term loan market? Perhaps they do and are funding the industry because they are unwilling to take risks by loaning money to applicants who they feel cannot pay them back. Yet the general public has every reason to be angry with banks. After all, it’s the taxpayer who ultimately suffered because of banking errors during the recent economic crisis and it was the taxpayer who was forced to fund the subsequent bailout.

Dead Cash

America’s banks have ‘too much money’. Yes, you heard that right! More than $7.5 trillion in bank deposits were made in 2011, 10% above the 2010 figure. However, banks only issued loans worth $6.3 trillion, or an increase of less than 1% on 2010.

Instead of investing the balance in the American people and entrepreneurs, banks decided to place this money in mortgage-backed bonds and Treasury notes because these are seen as relatively risk-free investments. Banks have responded by complaining that their investments are generating less profit than in recent years.

Cash Advance Option

Such objections are not being tolerated by the general public. Instead of asking banks for aid, low and mid-income American families are looking for cash advances instead. Over $30 billion worth of payday loans were issued last year as hard-pressed Americans looked for loans worth a couple of hundred dollars. Although they must pay $15 per $100 on a short-term loan repaid within 14 days, this doesn’t seem like an unreasonable repayment to those who are in desperate need of emergency cash. If anything, they are grateful that there are regulated lenders who are willing to take the risk of lending money without collateral. Most lenders don’t even run a standard credit score background check.

Stick or Twist?

The Federal Reserve is so desperate for banks to lend money that they have launched ‘Operation Twist’ in a bid to get banks lending again. They have invested $400 million in an initiative that they hope will get consumers applying for more mortgages and businesses looking for more loans. Of course, this will only work if the banks will lend them the money of course. Unfortunately, credit standards are extremely tight which prevents many people from taking advantage of the low mortgage rates. It doesn’t help that the Federal Reserve is paying banks 0.25% interest just for depositing cash and not lending it. Yet banks are hoping to limit cash advances!

Until the US government gets their affairs in order, banks are going to be allowed sit on trillions of dollars that would be better off in the pockets of Americans who want a new home or wish to start up a business. By withholding this cash, banks are allowing the stagnant economy to remain that way. In the meantime, Americans are going to rely on cash advances by the thousand.

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  2. Self Helps Expands and Hopes To Reduce the Dependence of Californian Families on Cash Advances
  3. Banks and Payday Loans: A Shocking Secret
  4. Kansas City Groups Try To Find Alternatives to Cash Advances
  5. Separating Fact from Fantasy in Payday Loans