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Econwatch
February 24, 2010 9:31 AM

Bank Lending Sees Worst Drop since 1942

By
Daniel Carty
Topics
Banking
(CBS)
Increasing bank lending is key to the Obama administration's drive to help small businesses create jobs, but the news on the credit market remains bleak.

According to a Wall Street Journal report ($) Wednesday, bank lending in the U.S. saw its sharpest drop since 1942. The latest data on lending, released in a quarterly report from the Federal Deposit Insurance Corp., show the banking industry is still struggles to regain its footing even though the economy begins to rebound from the massive recession.

Among the other grim statistics in the FDIC report: 702 banks are in danger of failing, a 16-year high; more than 5 percent of loans are past due, the worst performance since officials began tracking data 26 years ago; and, according to FDIC chair Sheila Bair, the number of bank failures in 2010 is expected to exceed the 140 in 2009.

According to the Journal report, the decline in lending is likely caused by a combination of factors – banks tightening lending standards and, in some cases, actively reducing their loan portfolios. But there also may be a simple drop in demand, as businesses remain wary of the economy.


Add a Comment See all 13 Comments
by likeitbe February 24, 2010 4:49 PM EST
Bankers aren't stupid. They know this little community organizer is gonna screw things up for a good long time.
Reply to this comment
by rightbehind February 24, 2010 4:27 PM EST
Had my fill of these private banks to. Moving my IRAs to the Credit unions.
Reply to this comment
by Berkeley-SkirtLifter February 24, 2010 3:08 PM EST
by grandfatherdizzy February 24, 2010 12:40 PM EST
Until the bank robbers hear something definate from the inside moles (Tax Cheat Geithner and Burn my future nakee )regarding interest rates, bonuses, and banking regulations; they will not lend money. Why take any risk when they already are raking in record profits with thier credit card business, trading against there customer, continuing on the derivative path when (AIG)will pay 100% on the dollar. It's a sweet deal. Life could not be any better if you are in the exclusive Geithner / Wall Street club. For the small local bank and average Joe. Tighten your belt people these @#$%^^ are not through with us average folks yet.
____________________-

You words are worthy of a repost and my addition:

Why should they lend when they can behave like an Investment Bank? The rules changed in 1999 & 2000. Commercial or Business banks now have license to gamble in derivatives and othre "Financial Instruments".

Why should a commercial banks lend and collect a low interest low margin profit when they can do high risk, high reward gambling legalized in 1999 & 2000? And if their gambling does not pay dividends, the collect gov't money. It's a no-brainer.

Until commercial banks are restricted again from institutional bank activities, this "low lending" will continue. But who is going to step up and restrict commercial banks and make them behave like they did between 1936 and 2000?

Obama? doubt it, but he should. Geithner,? no way.

Reinstall Glass-Steagall! End the "bucket shop" style gambling on Wall Street currently allowed by laws passed in the last session of the lame duck congress of 2000.

Anybody that does a couple hours worth of research will clearly see what's going on, and will also realize this charade is not going to end anytime soon. Too many people getting way too rich, too fast, for this gravy train to end.
Reply to this comment
by bajajohn1 February 24, 2010 2:24 PM EST
Wait a darn minute now! The banks were bailed out with our tax money. We want you greedy bankers to start lending our money to our fellow citizens...NOW!
Reply to this comment
by jntlw February 24, 2010 1:08 PM EST
The house of cards will come down soon and all the crooks will be gathered together to be cooked slowly- God's plan is soon to come to fruition.
Reply to this comment
by GreatDepression February 24, 2010 1:08 PM EST
Where is the late Republican ex-Senator Phil Gramm?
Reply to this comment
by book_of_wally February 24, 2010 2:13 PM EST
He is still alive, he was McCains economic advisor in 2008.
by sjc_1 February 24, 2010 10:41 PM EST
"Nation of Whiners" Phil is still alive and in an undisclosed location.
by sjc_1 February 24, 2010 12:50 PM EST
I like the idea of using $30 billion from the TARP interest and putting it in local banks to keep small business going. If they have a viable plan they should be able to get the money.
Reply to this comment
by jtdev1 February 24, 2010 12:59 PM EST
They can borrow money now,

All depends on their meaning of "Viable Plan"...


The banks don't need money at all. They have pleanty to loan out, they are just afraid to do so because they know this thing is not over, it's just the begining.

Wait till the Feds raise the rates again and all those ARMs start adjusting again.


They never fixed the problem, they only bailed out the Insurance companies (hence the banks). The troubled mortgages are still out there.
by sjc_1 February 24, 2010 1:13 PM EST
Big banks have the money, but do not lend much to small business at the local level. It is "just the beginning" if we do nothing, a self fulfilling prophecy.
by grandfatherdizzy February 24, 2010 12:40 PM EST
Until the bank robbers hear something definate from the inside moles (Tax Cheat Geithner and Burn my future nakee )regarding interest rates, bonuses, and banking regulations; they will not lend money. Why take any risk when they already are raking in record profits with thier credit card business, trading against there customer, continuing on the derivative path when (AIG)will pay 100% on the dollar. It's a sweet deal. Life could not be any better if you are in the exclusive Geithner / Wall Street club. For the small local bank and average Joe. Tighten your belt people these @#$%^^ are not through with us average folks yet.
Reply to this comment
by thesevenveils February 24, 2010 10:57 AM EST
Super low interest rats from the Fed are feeding the Wall Street sharks and not helping the job and housing markets.
Reply to this comment
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