Lending is an investment and investments are all about the comparison of alternatives and the assessment of risks -vs- return. Up until recently, the government was issuing treasury notes with yields in excess of 40%. Consequently, banks found treasuries more attractive than long-term loans yielding 16-20%. Treasury bills have since declined from the high levels, but still offer an attractive return on investment when comparing liquidity, the high transactional costs of long-term lending, and the short-term nature of the investment. Different analytical techniques and lending practices are used to assess loan risks depending on the specialized.
