“Guarantor agrees to notify Bank of any violation of any applicable usury law within 60 days of its occurrence, and Bank will have 60 days to correct

Just another tidbit from Joe Nocera's blog on the NY Times. It's from an Anon Banker:

"Banks are not making loans. Does that comment mean that no loans are being made at any bank? Of course not. If the borrower provides the bank with both a belt and a pair of suspenders, the loan is being granted. The banks need to recapitalize and they are going to do that. But if the banks receive federal funding through the bailout program they should be required to utilize some of those funds for S.B.A. loans. The big banks are not going to voluntarily engage themselves in boosting our failing economy by proactively utilizing the SBA program, whether it is priced with a base of Prime or a base of Libor +3 percent. I just don’t see it happening. In fact, I see just the opposite. In addition to not making new loans, the banks are systematically withdrawing commitments and capital from the economy. "

This is the problem with a Hybrid Plan like TARP. The interests of the Government and Banks are not the same, and the banks are going to look out for their own interests. Thank you for the money.

"Another friend had his credit line cut. He has a business equity line of credit, a fairly unique product in the industry where the line is actually to the business, but it is secured directly by a lien on the personal real estate. He asked me to look over his loan documentation to see if he had any case for an argument against cutting his line.

I read his personal guarantee, security agreement and Business Equity Line of Credit Agreement from that bank. And, basically, if the bank chooses to cut his line because the value of the collateral decreased, he cannot do anything to change that.

But there was an interesting line written into the guarantee, that I thought might bring some humor to this otherwise humorless topic. And I quote, “Guarantor agrees to notify Bank of any violation of any applicable usury law within 60 days of its occurrence, and Bank will have 60 days to correct such violation.”

Big Banks! Love them, or perhaps, leave them, and go to the community banks."

I'm not sure that I read that correctly. It seems to say that if the bank breaks the law, the borrower needs to tell the bank and allow them to correct the situation, if they don't want to contest it, before they can be prosecuted or fined. I'm pretty sure that I misread that.