Many of the nation’s biggest banks actually made fewer loans at the end of 2008, even though they had received $148 billion in bailout money from the federal government.
According to an analysis by the Wall Street Journal, outstanding loan balances fell $46 billion at 10 of the 13 biggest beneficiaries of the Treasury Department’s Troubled Asset Relief Program, including Citigroup and Bank of America.
The banks argued that they couldn’t be expected to turn all of that taxpayer provided capital into new loans overnight. It takes time to find and make prudent loans, especially in the depths of a serious recession when so many consumers and businesses don’t even want to take on new debt.
Yet two-thirds of all banks increased their loan portfolios in the final, dismal months of 2008, so someone was out there borrowing.
And when we look at the interest rates big banks are offering on many types of loans, we have to wonder how serious they can possibly be about expanding their portfolios.
Just this week, for example, Bankaholic’s crack research staff was comparing rates on $30,000 home equity lines of credit for borrowers with good credit (FICO scores of between 660 and 749).
Here’s what it found in four markets:
Huntsville, Ala.: 3.25% at Colonial Bank vs. 6.75% at Wachovia
Reading, Pa.: 3.25% at Nationwide vs. 6.74% at Bank of America
Flagstaff, Ariz.: 3.25% at Nationwide vs. 7.12% at Wells Fargo
Cleveland, Ohio: 2.99% at Dollar Bank vs. 5.49% at U.S. Bank
Bottom line: Another quarter is almost over and we often find the big banks aren’t offering the kind of competitive rates that would result in lots of new loans.
(They aren’t offering very good rates on deposits either. See our most recent “Worst rate of the week” for a sorry example of that.)
We can only hope the big banks’ first quarter earnings reports show they are finally putting all of that government money to work, making more loans and boosting the economy.
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