ECONOMIC FEARS CONTINUE SO BANKS LOAN LESS MONEY!
ECONOMIC FEARS CONTINUE SO BANKS LOAN LESS MONEY!
IN APRIL MAY . . . MOST LOANS CAME FROM MORTGAGE REFINANCES RENEWING BUSINESS LINES OF CREDIT NOT NEW LOANS!
Those who thought the massive Fed Bailout of Banks by both the current and previous Presidential Administrations would cure all our lending ills – are likely disappointed!
Despite big cash infusions from Washington totaling hundreds of billions of dollars the total amount of loans held by the 15 largest banks in the U.S. has not grown. In fact the portfolio of these bank loans actually fell by 2.8% in the Second Quarter 2009. Further according to an analysis by The Wall Street Journal in a story by David Enrich and Dan Fitzpartick most of the new loans during the Second Quarter came from either renewing or extending lines of credit to businesses or from refinancing of existing home mortgages.
The banks reviewed include J.P. Morgan Chase Bank of America Citigroup Fifth Third Bancorp Regions Financial U.S. Bancorp and others. The Top 15 Banking Institutions hold 47% of all federally-insured savings deposits nationwide. They received collectively $182.5 Billion in taxpayer-funded money from the Fed’s Troubled Asset Relief Program. Still as of the end of June 2009 these same banks showed $4.3 Trillion worth of loans across their Balance Sheets down 2.3% versus March 31st.
Economic experts say the tightened purse strings of these larger lenders are making it harder for an economic recovery to take hold.. Some predict that increased lending levels will not actually occur until the Second Half 2010.
Although many are disappointed that the Fed Relief Program did not result in an increase in loan volume overall others contend that the TARP was not designed to increase loan volume but to prevent major banking system collapse. These supporters feel the program has achieved that.
One analyst Gerald Cassidy of RBC Capital Markets sees the problem as few companies and homeowners are paying down their existing loans. Until they do and lenders more favorably adjust their underwriting standards in his opinion the capital markets will not loosen and an economic rebound will not begin in earnest.
DEAN MOSS & DEAN’S TEAM CHICAGO
