There are various factors that led to increase of interest rates with bank loans. Early on 2002, it was clear that credit was supporting housing rather than business investment. Additionally, empirical surveys utilizing data from developed countries portrayed that excessive credit development greatly facilitated to the harshness of the crisis. More so, downward force upon interest rates was established by rising and high US present account deficit which extended alongside the housing bubble during 2006. The Federal Reserve personnel elaborated the manner in which trade deficits required US to borrow cash in the progress of fixing up bond costs and lowering interest rates and read full article.
The chairman of Federal Reserve, Bernanke elaborated that from 1996 – 2004, the USA present account deficit extended by $650 billion, that is from 1.5% – 5.8% of GDP. Funding the deficits necessitated the country to seek huge sums of cash from abroad and the larger part of the same from countries operating trade surpluses. Mainly, those were the developing economies within Asia and oil-exporting countries. The balance of payments requires that a country like US operating a current account deficit likewise to own an investment capital account in addition to the same amount. Thus, huge and growing sums of foreign money in form of capital flowed into US with the aim of financing the imports. As a result, the high interest rates given by traditional lenders such as banks has forced business investors from seeking alternative sources of cash. Today, stock lending and Equities First stands at the core of the processes having financing several borrowers for 15 years.
Whatever happened in US created huge demand for different kinds of financial assets, raising the costs of such assets while minimizing interest rates. To date, conventional lenders have made their lending criteria a bit challenging which has left Equities First on the high demand in offering loans based on stocks as security and Equities First’s lacrosse camp.