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Friday, September 25, 2009

Benchmark Bank Freezes Credit Lines

According to a report in the Daily Herald, Benchmark Bank has sent a letter to 300 customers saying its seeking recapitalization and will suspend advances on all existing credit lines, including advances on home equity loans and overdraft lines of credit.

Even checks already written as advances on credit lines would be denied.

The bank says they are seeking $8 million in additional capital and are attempting to sell shares to a local group of investors.

1 comment:

Leonard said...

There is nothing new in that. Chase did the same thing more than a year ago.

All they are doing is capturing capital to make the balance sheet look better at the expense of their customers.

You see banks do not lend money in the sense of the movie "Its a Wnderful Life" where George Bailey goes into the vault and brings out cash to pay the seller of a property.

The asset is the credit application and ultimately the promissory note and mortgage signed by the borrower. The borrower gives this asset to the bank and by virtue of the note and mortgage an account is created and at closing an offsetting account is created and drawn down which creates the "money" that is used to pay the seller at closing.

Yes Virginia banks lend the borrower's credit back to the borrower and charge interest to the borrower for the privilege of essentially borrowing from themselves by virtue of the bank's use of that credit asset.

Read "Modern Money Mechanics" written and published by the Chicago Federal Reserve Bank.

There are easier reads out there which are easier to find. Then check out a recent Kansas Supreme Court case which laid the bank's processes bare and then ask again just why we are in this economic tank.

Do some research and you will learn that contrary to the assertions of the politicians, especially congress, this was not caused by greedy subprime borrowers.

All congress did was try to deflect its culpability to the general population and everyone believes them. Do the research.