The trouble with overcapitalizing banks is that when banks cut back on loans, they start a domino effect.
So far, the proposed rescue package has failed to ease worries at these funds, which have cut back on loans to European banks and are demanding higher rates and quicker repayment.
When the recession forced museums to cut back on expensive loan shows a few years ago, some worried that it would hurt attendance: With great works from around the world replaced by stuff hauled up from storage rooms, would art lovers' hearts still flutter?
My Rich Uncle, Campus Door (owned by Lehman Brothers), the College Loan Corporation and Education Finance Partners have eliminated or cut back on private loans.
Short-term borrowing costs are rising, which could lead institutions to cut back on new loans and call in old ones, crimping economic growth.
The dismissal caught her by surprise, but she said other firms have also cut back as construction loans have dried up.
Instead, after the Fed slashed interest rates, the banks hunkered down, cut back on risky loans, and allowed the wider spreads to work their magic, and over time earned their way out of insolvency.
State-owned banks have cut back on corporate loans, which have typically been issued at or below the regulated rate of 5.3percentt, often with little regard for the creditworthiness of the borrower.
The ECB could cut back on the loans it and the national central bank in Athens make to Greek banks, if the government does not get an extension to the bailout programme.
Mr. Applegarth said Northern Rock would cut back on issuing new loans, as well as cutting costs through a hiring freeze and other steps.
