Largest Banks That Received Aid Cut Lending
WASHINGTON — The 20 largest banks that received government rescue funds slightly reduced their lending to consumers and businesses in the last three months of 2008, the government said Tuesday.
The Treasury Department said the banks reduced their mortgage and business loans by a median of 1 percent each, while credit card lending rose by a median of 2 percent. The median is the point halfway between the banks that lent the most and those that lent the least.
The department's report is the latest sign that the bailout has done little to increase bank lending. A quarterly survey by the Federal Reserve earlier this month found that nearly 60 percent of banks said they had tightened lending standards on credit card and other consumer loans in the previous three months.
Many lawmakers have blasted the banks for not lending more in the wake of the $700 billion financial rescue program approved by Congress last October.
The Treasury Department said lending likely would have fallen further without the roughly $200 billion that has been provided to banks so far, given the sharp downturn in the economy.
"Loan activity was resilient in the face of the worst economic downturn in decades," the department said.
The report also said that banks reduced new commercial real estate loans by 19 percent, while increasing loan renewals by 55 percent.
The data is from the first in what the department says will be a series of monthly reports on the banks' lending. The report did not provide total lending amounts in each category.
The Treasury Department also said the report is intended to increase the transparency of the widely unpopular bank bailout program, which has provided billions of dollars with few strings attached to large financial institutions like Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co.
In December, The Associated Press asked 21 banks that received more than $1 billion from the program to describe what has been done with the money. None would provide any specifics.
The report said that Bank of America, for example, originated about $44.6 billion in new mortgages and $49 billion of new business loans in last year's fourth quarter, but didn't provide any figures for the same quarter a year earlier.
Treasury Secretary Timothy Geithner said last week that the Obama administration will continue to provide capital to banks from the remaining $350 billion of the financial rescue program, but the new money will be awarded under tighter restrictions to make sure the recipients use the resources to boost lending to consumers and businesses.
The department said less demand for loans and tighter underwriting standards by the banks restrained lending activity in the fourth quarter.
Lending dropped from October to November, the department said, and then picked up from November to December. That uptick was partly a result of an increase in mortgage applications, the report said, as mortgage rates fell sharply in response to a Federal Reserve program to make home loans cheaper.
The Federal Deposit Insurance Corporation's decision last fall to guarantee new debt issued by financial institutions also likely boosted lending totals, the department said.
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CHRISTOPHER S. RUGABER | February 17, 2009 06:29 PM EST |
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