According to a new report from the FDIC, Bank of America (NYSE: BAC), JP Morgan Chase (NYSE: JPM), Citibank (NYSE: C), Wells Fargo (NYSE: WFC) have decreased their lending during the 3rd quarter by over $157 billion.
Although the federal government has loaned major banks hundreds of billions of dollars, the nation’s largest banks, continue to be very reserved about the loans that they are willing to issue.
According to FDIC Chairman, Sheila Bair, lending from banks dropped by 3% during the third quarter of 2009, which marked the steepest drop since the Federal Deposit Insurance Corporation began measuring such data in 1984. Bair also stated that large banks, such as Bank of America, Citibank, JP Morgan Chase, Wells Fargo and others were responsible for 75% of that decline.
A secondary reason causing a shortage of loans is the collapse of many smaller banks. The FDIC has had to rescue 124 failed financial institutions this year and many experts believe that hundreds of more banks will fail in the next several months. At the end of September, there were 552 banks (or about 7% of all banks) were on the FDIC’s problem list.
The bank failures that have happened to date have placed a significant strain on the FDIC’s waning resources, causing the agency to post its first negative balance for its insurance fund since 1992, when regulators were rescuing banks that had failed during the savings and loan crisis.
