I hate to take an unpopular stand on something, but jeez, we’re making it awfully hard on the poor bankers.
For as long as I can remember, we in the world of entrepreneurship groused about how the banks wouldn't invest in a good business plan. Being a contrarian, I’ve tended, through some 30 years of this, to remind people that banking law used to forbid that. Ever since the Great Depression, regulations wanted banks to have collateral before they risked depositors’ money.
And then the pendulum swung, and for the past few (eight? 15?) years, we—meaning the regulators and Congress, not you and me—have been telling the banks to go for it. Get wild. Say "go ahead" to the mortgage and so forth.
And, partly as a result, the banks—some banks, some mortgage lenders, some people in the industry—made bad decisions. Stupid decisions. Greedy decisions. The authorities pretty much told them it was OK. Banks took dumb risks, and banks went under, and then banks got bailed out. With our money.
And now there’s a credit crunch. We need to jump-start the economy. We need the banks to start lending money.
But wait—here’s the Catch-22—do we want them to not be cautious? Do we want them to make bad loans to high-risk borrowers without collateral? I don’t think so.
Aren’t we sending a lot of mixed messages lately? I mean, I’m jus’ sayin’.
Tim Berry is president and founder of Palo Alto Software, founder of bplans.com, and a cofounder of Borland International. He teaches about starting a business at the University of Oregon. He is author of books and software, including Business Plan Pro, published by Palo Alto Software, and The Plan-As-You-Go Business Plan, published by Entrepreneur Press. Berry has a Stanford M.B.A. degree and degrees with honors from the University of Oregon and the University of Notre Dame. He blogs at Planning Startup Stories and Up and Running.