Commercial Banks Hoarding Cash?
From Mark Lieberman on the FOX Business website this past Friday:
In the year since the Troubled Asset Relief Program was enacted by Congress under pressure from Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson, the nation’s commercial banks reduced loan balances by more than $400 billion and increased their cash-on-hand by over $500 billion, according to a report by the Federal Reserve.
The weekly report on commercial bank assets – issued on a two-week lag – showed commercial banks had just under $1 trillion in cash assets – $993.4 billion – at September 30 compared with $493 billion a year ago. The report for September 30 was released Friday (Oct 9).
The TARP was enacted with a variety of specific objectives but primarily to provide banks with resources to keep credit markets active.
Instead, according to the Federal Reserve report, commercial bank credit has fallen in just about every category. The largest exception was for home equity lines of credit which increased from about $539 billion outstanding a year ago to just over $600 billion.
“Closed end residential loans,” which include first mortgage loans, increased to $1.48 trillion from $1.45 trillion a year ago, a modest 2.4% increase. Consumer loans increased to $841 billion from $834 billion one year earlier with “other consumer loans” which include auto loans, accounting for $4.7 billion of the $7 billion increase.
By contrast, commercial and industrial lending has plunged $217.6 billion or 12% in the last year. Businesses use the proceeds from such loans for general operating purposes including payrolls, inventory and investment.
Perhaps those “going out of business” signs popping up all over can shed more light on this situation…
Source:
“Full-Year TARP Results: Banks Hoard More Cash, Make Fewer Loans”
Mark Lieberman
FOX Business, October 9, 2009
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