Another Reason Banks Aren't Lending

Let me shamelessly block-quote Felix Salmon block-quoting "a California banker":

If you’re a bank with a relatively healthy balance sheet with adequate capital, (like us)you want to maintain surplus capital in order to stay on the FDIC’s list of banks they can transfer the loans and deposits from a failed institution into.

This is a home run for the acquiring bank and far more of an instant benefit than any new lending.

The problem here is that healthy banks end up competing with each other to have the largest capital surplus and therefore the greatest chance of being anointed in this manner by the FDIC. If everybody was lending, the FDIC would still have to place failed banks’ assets and deposits with someone. But instead we get the opposite corner solution, where nobody is lending — except, presumably, for banks which are close to failure and need all the interest income they can get.

On the list of reasons why banks aren't passing the easy buck onto potential borrowers, I suspect that this particular prisoner's dillema ranks significantly below, say, a dirth of demand on the one hand, and extreme risk aversion on the supply side. But it's still kind of an interesting situation. Off the top of my head, I suppose the FDIC could start charging higher premiums to banks with surplus capital over a certain level. That is, if they even have the power to do that. And if that makes any sense; it sure sounds counter-intuitive. Thoughts?

Either way, if the goal is to get banks lending again, additional hurdles/disincentives like these probably don't help.