FDIC reports big increase in bank lending

A Wells Fargo sign

Banks are lending more and more these days, according to the FDIC. Photo Credit: MoneyBlogNewz/Flickr/CC-BY

One of the chief complaints about things holding back an economic recovery has been the lack of willingness of banks to lend money. They appear to be opening back up to it somewhat; the FDIC has reported an increase in bank lending.

More credit being extended

Recessions are not good; the root word is “recede,” so it means that the overall economy is shrinking. Part of that includes credit, such as money that banks are willing to lend to people.

Bank lending has not been as active as many would like in the past few years. In 2009, according to the Washington Post, the Federal Deposit Insurance Corporation observed that overall bank lending, or the sum total of all loans made by the nation’s banks, was $587 billion. Though that is still a titanic amount of money, it marked a decline from 2008 of 7.5 percent, the largest single-year drop in bank lending since the 1940s.

Banks have been slowly building themselves back up to extending more credit to more people. The FDIC has just released the figures on FDIC insured banks and found that bank lending grew by leaps and bounds in the last three months of 2011, according to CBS.

Biggest increase in four years

The FDIC noted in its report for the last quarter of calendar year 2011 that bank lending grew at the fastest observed pace since 2007. Banks added a further $130 billion to their balance sheets, a 1.8 percent increase over the quarter that preceded it. They also happened to make a lot more money last year, having realized earnings of $119.5 billion for the last quarter of 2011, a 40 percent increase from the same period in 2010.

That said, the increase is largely benefiting the nation’s largest banks, or those with assets of more than $10 billion. That includes banks that are often maligned, such as Bank of America and Wells Fargo. Banks of that size represent 1.4 percent of the total number of banks in the nation, though they made 83 percent of the proceeds. Perhaps they can afford to charge fewer bank fees.

[Banks still don’t do many small credit products like payday loans]

More banks off the trouble list

There was also a reduction in the number of banks on the “troubled” list at the FDIC, or those banks in the greatest danger of failing. There are 844 banks in danger of failure in the third quarter of calendar 2011, which decreased to 813, according to Businessweek.

The reduction was not due to those banks finally failing . The number of bank failures for the period was only 18. The total for the year was 92, which is a dramatic reduction from the 157 banks that went under in 2010. According to the Los Angeles Times, 11 more have failed since Jan. 1, 2012.

Sources

CBS

Los Angeles Times

Businessweek

Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2010/02/23/AR2010022302120.html?hpid=topnews

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