Value of loans at biggest banks drops in Sept.

AP News
Posted: Nov 17, 2009 5:06 PM

The value of loans held by the largest banks who received the largest amounts of government bailout support fell for an eighth consecutive month in September, according to the Treasury Department.

Further declines in lending will act as a severe drag on the economy as it struggles to rebound from the longest recession since the 1930s, analysts said.

Critics contend that the long string of drops in value proves the bailout program failed at its stated goal of boosting loans to consumers and businesses. The Obama administration says it's typical for lending to fall sharply during a recession. Administration officials have argued that the lending declines would have been even steeper without the bailout program.

The average value of loan balances at the 22 largest institutions who received government support dropped $28 billion, or 0.7 percent, in September to an average for each bank of $4.178 trillion. That followed a decline of 1 percent, or $43.8 billion, in August.

The survey did find that new loan originations rose 2 percent in September to $239.4 billion, on average, for the 22 banks.

The financial institutions with the largest percentage declines in new loans in September were Bank of New York Mellon and American Express, according to the report released late Monday.

The institutions with the largest increases in loan originations were Goldman Sachs and Morgan Stanley.

Two banks which have received the largest amounts of government support saw different outcomes in new loans in September. Loan originations fell 6 percent at Bank of America Corp., but rose 4 percent at Citigroup Inc.