The recession being in full force and a strong need for economic stimulation leaves many wondering if banks – which play a huge role in providing liquidity – are lending money. Unfortunately, this question can’t be answer with a simple yes or no.
There are a number of banks that say they are stimulating the economy with tons of home and small business loans. And they are … in a way. For example, Bank of America says it has distributed 45,000 loans. However, when you explore these lending numbers more closely, you’’ll see that Bank of America loans added up to $183 billion – an increase from the last quarter of 2008, yet not really an impressive increase since that quarter marked a period that the lending industry took a major dive.
In general, there are mixed feelings associated with lending, which is probably why banks are doing it only to an extent. On one hand, lending is needed to stimulate the economy; consumers need credit to get out there and buy products while companies need money to expand and hire new employees. Yet, on the other hand, irresponsible lending and credit usage practices are what got us into this recession fix in the first place. So if more credit is extended, the same activities that placed us in a recession just might keep us there – or worse, move us into a depression.
So what is the banking industry to do? Some would suggest that it rely on those TARP funds that were handed out for the very purpose of stimulating the economy. But with the fear of more irresponsible practices firmly set, it’s likely that we won’t see a genuine leap in lending for quite some time.