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Banks are stepping up their lending efforts

This morning I received an email from Charles Schwab offering to reduce my margin interest by up to 30%, depending on my willingness to borrow. It strikes me as unusual, but also very interesting, because this represents an aggressive attempt to increase lending activity. Perhaps banks are finally realizing that the very steep yield curve gives them a fabulous opportunity to make money by lending more. Their prior reluctance to lend was undoubtedly driven in part by concerns that the economy was fragile and credit risks were high, but those concerns are likely beginning to fade.

Once a recovery gets underway, it becomes self-perpetuating as confidence rises and risk-taking resumes.

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