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Tags: Companies | borrowing | banks | economy

US Companies Cut Borrowings, Threatening Banks, Economy

By    |   Friday, 26 April 2013 11:34 AM

U.S. companies are curbing their banks loans, creating danger for banks and the economy as a whole.

"It's not a good sign if loan growth is slowing," Gus Faucher, a senior economist at PNC Financial Services Group, told The Wall Street Journal.

Though he doesn’t expect a recession soon, "lending is important in keeping the economy going in order to allow businesses to expand," Faucher said.

Editor's Note:
 
The Truth About the Economy — Government Documents Lead to Eerie Conclusion

Business loans outstanding at the country’s biggest banks plummeted 9 percent in the first two weeks of April from the end of March, according to the Federal Reserve. That drop comes after a 2.7 percent increase in the first quarter, the worst showing in two years.

Companies are holding back on their borrowings because of concern over rising healthcare costs and the economy’s weakness, bankers and corporate executives told The Journal.

In addition, companies pushed up their borrowings late last year to get their money before expected tax increases.

Business owners "feel very, very hesitant to invest," and the economy is "struggling to get solid footing," BB&T CEO Kelly King told The Journal. "We didn't expect the wall we hit."

Ironically amid this trend, the International Monetary Fund is worried about loosening standards for U.S. corporate borrowing.

"In the United States, corporate debt underwriting standards are weakening rapidly," said José Viñals, head of the IMF's monetary and capital markets department, according to Reuters.
"This is a cause for concern that needs to be monitored."

To be sure, he’s almost certainly referring to corporate bond issuance rather than bank borrowing.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

© 2022 Newsmax Finance. All rights reserved.


FinanceNews
U.S. companies are curbing their banks loans, creating danger for banks and the economy as a whole.
Companies,borrowing,banks,economy
281
2013-34-26
Friday, 26 April 2013 11:34 AM
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