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Banks Reduced Lending After Bailout

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The Associated Press

Published: February 18, 2009

WASHINGTON - The 20 largest banks that received government rescue funds slightly reduced their lending to consumers and businesses in the last three months of 2008, the government said Tuesday.

The Treasury Department said the banks reduced their mortgage and business loans by a median of 1 percent each, while credit card lending rose by a median of 2 percent. The median is the point halfway between the banks that lent the most and those that lent the least.

Many lawmakers have blasted the banks for not lending more in the wake of the $700 billion financial rescue program approved by Congress last October.

The Treasury Department said lending likely would have fallen further without the roughly $200 billion that has been provided to banks so far, given the sharp downturn in the economy.

The report also said that banks reduced new commercial real estate loans by 19 percent, while increasing loan renewals by 55 percent.

The Treasury Department said the report is intended to increase the transparency of the widely unpopular bank bailout program, which has provided billions of dollars with few strings attached to large financial institutions like Bank of America, Citigroup and JPMorgan Chase & Co.
Treasury Secretary Timothy Geithner said last week that the Obama administration will continue to provide capital to banks from the remaining $350 billion of the financial rescue program, but the new money will be awarded under tighter restrictions to make sure the recipients use the resources to boost lending to consumers and businesses.

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