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| I had not read your other post prior to my post. I see that you understand it, we just interpret it differently. I apologize for my premature comments. No, banks have not been able to borrow at 0% for 100 years, but there has always been a spread between what they can borrow at the fed and what retail interest rates are. No different than other businesses. There is a wholesale rate and a retail rate. Typically wholesale is not 0, but that is where we are dealing now. 0% is, though, equating to very low borrowing rates for individuals, a positive for the general consumer, business owner, or farmer. Banks also borrow from the fed long term funds that are not at the 0% rate.
To answer your final question. The money to fund that loan comes from the bank's available funds. If there are excess funds in the bank, then those excess funds will be deposited with the fed. No different then Joe Consumer depositing his paycheck into our bank. If the bank is short funds, then those funds would, yes, be borrowed from the fed.
You do have an understanding of how the bank funds itself, I can see that. I guess we just see things differently. I work in a bank and am probably biased, but the bank is a for profit company just like many others that provides a great service to the community in which it resides. I am fortunate enough to work in an organization that "does it right" and understands agriculture. I had previously been in one that did not. Our bank survived the 80's, as did the majority of our ag customers. Without the bank, these customers would not have. The posts above and linked story are sickening, but I understand do happen. I am not in the business of telling producers how to run their operation, sell their commodities, etc., but there are times that borrowers simply do not have the assets, equity, or cash flow to continue in the fashion that they have in past years. This is where it pays to have a banker that "gets it." I work full time in the bank, farm my corn/soybean operation with my family, and feed cattle on my own. I am paying margin calls right with my customers. I see first hand what my borrowers do and feel that this adds great value. Majority of bankers in my area are good, but there are some poor ag bankers and banks. I am fortunate enough to work in a great ag bank that, I feel, adds value to it's borrowers. I have a good customer base that I think would agree as well. If a person does not have this with their bank, they need to keep looking. | |
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Bankers and cattle prices
