Lending by TARP Banks Remains Flat

Lending by the 20 largest banks to receive TARP funds remained flat through the first two months of the year, despite the program's stated goal of providing government funds to free up credit.

Even so, the news is good, according to Bill Askew, Senior Policy Advisor for the Financial Services Roundtable.

"Considering that February is traditionally considered an 'off' month in lending for banks as there are fewer business days, this is a particularly bright piece of news," Askew wrote in summarizing the Roundtable's monthly analysis of Treasury Department data. He reported that total lending by the 20 banks remains up 9.2 percent from December.

Of the 20 banks, nine reported that they increased their total loan balances from January through February, which Askew said demonstrated the role the TARP program has played in stabilizing markets and restoring the flow of credit to consumers and businesses.

The Roundtable reported that mortgage loan originations increased 30 percent from January to February, from $78 billion to $102 billion. Loan balances for nearly all categories of lending were up from November and December levels, with the exception of credit cards and commercial and industrial lending.

TARP, the Toxic Assets Relief Program, is the program initiated by the U.S. government in Oct. 2008 to provide fresh capital to banks and other financial institutions to help restore the flow of credit. To date, the program has purchased approximately $200 billion in bank equity shares through its Capital Purchase Program.

The Financial Services Roundtable is an independent organization representing integrated financial service providers, with roots dating back to 1912.