U.S. says banks getting help cut lending (by 10%) in July

[UpInArms]

Source: Reuters

WASHINGTON, Sept 15 (Reuters) - The U.S. Treasury Department said on Tuesday that banks receiving government bailout funds cut their new lending by 10 percent in July.

A monthly survey of lending activities at the top 22 banks that have received capital injections showed their overall outstanding loan balance was down 1 percent from June to July because of less demand from borrowers and charge-offs by banks, the Treasury said.

"Total origination of new loans at the 22 surveyed institutions decreased 10 percent from June to July," the Treasury report said, adding that the value of new loans by all the banks was about $282 billion in July.

The decision to pump taxpayers' money into banks was motivated largely by lawmakers' wish for banks to keep lending, but a sluggish economy and more cautious consumers appear to be leading to more cautious use of credit.

Treasury said banks again reported that demand in the commercial real estate and the commercial and industrial loans markets "is well below normal levels," adding that "none of the respondents predicted change in demand in the near term."

Read more: http://www.reuters.com/article/bondsNews/idUSN157962020090915

[rfranklin]

1. Well, it's a damn good thing that we bailed them out....

and eased that credit crunch...

Jeez, we need a complete and drastic overhaul of the banking system in this country. We also need to tar and feather a few of these bankers to set an example. They have not learned a thing. In fact, the ones left are patting themselves on their backs for coming through the panic.

[MisterP]

4. imminent disaster! if only you knew what our Leaders did!

there were dozens spouting this in, like, February
like bailing out the same guys who caused global crisis was a good idea
like we're going to do with mandated insurance: competition will save us? so the problem is not enough leeches?

[Ghost Dog]

2. Related: US credit shrinks at Great Depression rate prompting fears of double-dip recession

By Ambrose Evans-Pritchard, International Business Editor
Published: 11:59PM BST 14 Sep 2009

Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn). "There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."

The M3 "broad" money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate.

Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an "epic" 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc. "For the first time in the post-WW2 era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said.

...

Mr Congdon said a key reason for credit contraction is pressure on banks to raise their capital ratios. While this is well-advised in boom times, it makes matters worse in a downturn. "The current drive to make banks less leveraged and safer is having the perverse consequence of destroying money balances," he said. "It strengthens the deflationary forces in the world economy. That increases the risks of a double-dip recession in 2010." Referring to the debt-purge policy of US Treasury Secretary Andrew Mellon in the early 1930s, he added: "The pressure on banks to de-risk and to de-leverage is the modern version of liquidationism: it is potentially just as dangerous."

US banks are cutting lending by around 1pc a month. A similar process is occurring in the eurozone, where private sector credit has been contracting and M3 has been flat for almost a year.

/... http://www.telegraph.co.uk/finance/financetopics/recession/6190818/US-credit-shrinks-at-Great-Depression-rate-prompting-fears-of-double-dip-recession.html ... and note all the, um, freakish comments if you can stomach it...

[roamer65]

5. This is exactly why Nouriel Roubini wanted the banks nationalized.

They are not able to make sound judgements in this economic environment.

[midnight]

3. Was this massive bailout so these banksters could get pedicures?