In another sign that liquidity has not yet returned to financial markets, bank lending decreased in February among banks that have received bailout money,
The Treasury Department reported that overall lending among the 21 largest banks to receive money under the Troubled Asset Relief Program declined by a median percentage of 2.2 percent, or $16 billion, from the month before.
Nine banks posted gains in loan activities, while twelve banks posted declines.
The biggest declines were in commercial real estate lending, where originations were down 23 percent, and commercial and industrial lending - typically used to pay for equipment and meet payroll - where originations were down 13 percent.
Despite the fact that total loans were down, there was at least one bright spot in the Treasury's report. Mortgage refinancing increased 42 percent between January and February, a sign that lower interest rates were enticing homeowners to restructure outstanding loans.
Sixteen of the 18 banks that make home loans reported increases in mortgage originations. The three other companies in the lending survey -- American Express Corp., State Street Corp., and CIT Group, Inc. - do not offer mortgages.
In addition, Treasury reported that home equity lines of credit were being originated at levels typical for the season, as consumers prepare for springtime remodeling projects. It reported in February that American credit card originations were down 2.27 percent from the previous month.
The TARP program, along with a number of other government initiatives, is intended to boost lending and spur the struggling economy. The 21 banks, the subjects of ongoing reports by the Treasury Department on the efficacy of the bailout, have received a total of $211 billion in federal funding.
The biggest declines in lending were marked by J.P. Morgan Chase & Co., The Goldman Sachs Group Inc., and Morgan Stanley. The largest increases were by Wells Fargo & Co., SunTrust Banks Inc. and Comerica Inc.
Both J.P. Morgan and Goldman Sachs are believed to be in better financial shape than their competitors, with the latter announcing plans earlier this week to return the $10 billion in bailout money it received.
J.P. Morgan, which today reported better than expected quarterly earning, said it plans to follow suit. CEO Jamie Dimon, calling the $25 billion in TARP funds it accepted a "scarlet letter," said the company "could pay it back tomorrow."
Banks have offered a number of reasons for the decline in lending, citing a poor economic climate and a wavering housing market. Consumers have reported that banks are requiring much stricter income verification than in the past, while businesses seeking loans are being forced to put up larger amounts of collateral.
The Treasury Department reported that overall lending among the 21 largest banks to receive money under the Troubled Asset Relief Program declined by a median percentage of 2.2 percent, or $16 billion, from the month before.
Nine banks posted gains in loan activities, while twelve banks posted declines.
The biggest declines were in commercial real estate lending, where originations were down 23 percent, and commercial and industrial lending - typically used to pay for equipment and meet payroll - where originations were down 13 percent.
Despite the fact that total loans were down, there was at least one bright spot in the Treasury's report. Mortgage refinancing increased 42 percent between January and February, a sign that lower interest rates were enticing homeowners to restructure outstanding loans.
Sixteen of the 18 banks that make home loans reported increases in mortgage originations. The three other companies in the lending survey -- American Express Corp., State Street Corp., and CIT Group, Inc. - do not offer mortgages.
In addition, Treasury reported that home equity lines of credit were being originated at levels typical for the season, as consumers prepare for springtime remodeling projects. It reported in February that American credit card originations were down 2.27 percent from the previous month.
The TARP program, along with a number of other government initiatives, is intended to boost lending and spur the struggling economy. The 21 banks, the subjects of ongoing reports by the Treasury Department on the efficacy of the bailout, have received a total of $211 billion in federal funding.
The biggest declines in lending were marked by J.P. Morgan Chase & Co., The Goldman Sachs Group Inc., and Morgan Stanley. The largest increases were by Wells Fargo & Co., SunTrust Banks Inc. and Comerica Inc.
Both J.P. Morgan and Goldman Sachs are believed to be in better financial shape than their competitors, with the latter announcing plans earlier this week to return the $10 billion in bailout money it received.
J.P. Morgan, which today reported better than expected quarterly earning, said it plans to follow suit. CEO Jamie Dimon, calling the $25 billion in TARP funds it accepted a "scarlet letter," said the company "could pay it back tomorrow."
Banks have offered a number of reasons for the decline in lending, citing a poor economic climate and a wavering housing market. Consumers have reported that banks are requiring much stricter income verification than in the past, while businesses seeking loans are being forced to put up larger amounts of collateral.
published April 16, 2009, 0 Comments
Leave a comment