The Treasury Department reported Monday that new lending dropped 35 percent in January at the nine largest banks that still owe bailout money.  However, average loan balances did rise 2 percent compared to December, the highest level since September.

The report is based on a survey by the Treasury Department, with January’s report being the last as the agency does not believe the aggregate month to month changes are meaningful any longer.

The nine banks surveyed were: Citigroup Inc. (NYSE: C), Fifth Third Bancorp (NSDQ: FITB), PNC Financial (NYSE: PNC), Hartford Financial Services (NYSE: HIG), Key Corp. (NYSE: KEY), Regions Financial (NYSE: RF), Suntrust Banks Inc. (NYSE: STI), Comerica Inc. (NYSE: CMA) and Marshall & Ilsley Corp. (NYSE: MI).

According to the January survey, the nine banks held 17 percent of the banking industry assets at the end of 2009.  The first survey was conducted in November 2008, at that time 22 large banks that still owned taxpayer bailout money participated and represented roughly 60 percent on banking industry assets.

When the government passed the $700 billion bailout plan, one of the main goals was to stimulate lending by banks by providing well needed liquidity.  That goal has had mixed results as lending has not really gained traction as banks digested heavy losses throughout 2009.