DESPITE TARP BAILOUT, Big U.S. Banks Have Not Increased Lending!
FOR LARGEST BANKS, LOANS OUTSTANDING FELL 1.4% DURING 4TH QUARTER, 2008!
Portfolios of loans at some of the largest U.S. Banks fell last quarter, despite the sizable infusions of capital they received from Federal Troubled Assets Recovery Program (TARP) funds. Indeed, many banks used the money instead to fund acquisitions of other banks, pay dividends to investors, and even build to pool for holiday bonuses to top employees. This disappoints many, including new President Barack Obama, and many in the new administration.
According to Wall Street Journal analysts, as summarized in David Enrich's WSJ Story from January 26th, outstanding loans at the Bank of America fell 1.2% during the Fourth Quarter. At J.P. Morgan Chase, loans dropped 2.2%, while Citigroup showed a 3.1% fall-off in outstanding loans.
In all, according to their research, 10 of the 13 biggest recipients of TARP money wrote fewer loans last quarter. That's a $46 Billion drop in loan volume. Some large banks, such as Wells Fargo, have yet to report their figures.
Only three of the largest banks - SunTrust, U.S. Bancorp, and BB&T Corporation - showed loan portfolio growth.
A survey last month by Duke University and the University of Illinois of 560 U.S. Companies found 59% of them felt hampered by currently-tight credit and lending rules. Many companies are curtailing expansion and slashing employees as a result of the shortage of financing - the full report is to be released within a few days.
Many bankers have justified the lower loan numbers, suggesting it might not be prudent to immediately convert TARP funds into new loans. This impacts residential mortgage borrowing - even though mortgage rates here in Chicago and across the U.S. remain low, mortgage apps decreased roughly 10% during the week ending January 16th, according to data provided by the Mortgage Bankers Association.
Read the Wall Street Journal Story for further details and graphs.
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