Saturday, March 13, 2010

Troubled banking industry sharply reduced lending in 2009
...But Bair said that the vast majority of the lending decline was the result of cutbacks by the nation's largest banks, which have tightened qualification standards for borrowers and increased the proportion of money that they hold in reserve against unexpected losses.

"Large banks do need to do a better job of stepping up to the plate here," Bair said.

The decline in lending is a looming issue as the economy begins to recover. Companies start by returning to full capacity, filling open desks with new workers or running equipment more hours each day. But for the recovery to continue, for businesses to expand and employment to grow, lending must begin to expand, too.

The decline also has become a major political issue amid broad public anger that the federal rescue of the banking industry has restored profitability but not the flow of loans. ...