Those who thought the massive Fed Bailout of Banks by both the current and previous Presidential Administrations would cure all our lending ills - are likely disappointed!
Despite big cash infusions from Washington totaling hundreds of billions of dollars, the total amount of loans held by the 15 largest banks in the U.S. has not grown. In fact, the portfolio of these bank loans actually fell, by 2.8% in the Second Quarter, 2009. Further, according to an analysis by The Wall Street Journal, in a story by David Enrich and Dan Fitzpartick, most of the new loans during the Second Quarter came from either renewing or extending lines of credit to businesses, or from refinancing of existing home mortgages.
The banks reviewed include J.P. Morgan Chase, Bank of America, Citigroup, Fifth Third Bancorp, Regions Financial, U.S. Bancorp, and others. The Top 15 Banking Institutions hold 47% of all federally-insured savings deposits nationwide. They received, collectively, $182.5 Billion in taxpayer-funded money from the Fed's Troubled Asset Relief Program. Still, as of the end of June, 2009, these same banks showed $4.3 Trillion worth of loans across their Balance Sheets, down 2.3% versus March 31st.
Economic experts say the tightened purse strings of these larger lenders are making it harder for an economic recovery to take hold.. Some predict that increased lending levels will not actually occur until the Second Half, 2010.
Although many are disappointed that the Fed Relief Program did not result in an increase in loan volume overall, others contend that the TARP was not designed to increase loan volume, but to prevent major banking system collapse. These supporters feel the program has achieved that.
One analyst, Gerald Cassidy of RBC Capital Markets, sees the problem as few companies and homeowners are paying down their existing loans. Until they do, and lenders more favorably adjust their underwriting standards, in his opinion, the capital markets will not loosen, and an economic rebound will not begin in earnest.
But it appears "forcing" banks to lend, by offering considerable infusions of cash and hoping they will do so - that formula doesn't seem to be working!
Please see our post today via BlogChicagoHomes.com.
DEAN & DEAN'S TEAM CHICAGO
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