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Banking industry reduced loans after stimulus
Key Excerpts from Article on Website of Washington Post
Posted: March 3rd, 2010
http://www.washingtonpost.com/wp-dyn/content/article/2010/02...
Lending by the banking industry fell by $587 billion, or 7.5 percent, in 2009, the largest annual decline since the 1940s, as the number of troubled financial institutions rose sharply, the Federal Deposit Insurance Corp. [has] reported. The FDIC considered 702 banks to be in some danger of failing as of the end of 2009, more than double the number at the beginning of the year. [FDIC Chairman Sheila C.] Bair said that the vast majority of the lending decline was the result of cutbacks by the nation's largest banks, which have tightened qualification standards for borrowers and increased the proportion of money that they hold in reserve against unexpected losses. The decline in lending is a looming issue as the economy begins to recover. But for the recovery to continue, for businesses to expand and employment to grow, lending must begin to expand, too. The decline also has become a major political issue amid broad public anger that the federal rescue of the banking industry has restored profitability but not the flow of loans. The FDIC [said] that the nation's 8,012 banks posted an aggregate profit of $12.5 billion in 2009. The largest banks accounted for most of those profits as a growing number of smaller banks have struggled to survive losses on commercial real estate loans.
Note: Wasn't the main purpose of the huge stimulus packages given to banks to increase lending? Where did those trillions go? For a treasure trove of revealing reports from major media sources on the realities of the banking bailouts that were supposedly intended to increase lending, click here.
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