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Despite the hundreds of billions of dollars loaned by the federal government to the nation’s largest banks, the financial industry continues to be stingy with loans itself, creating a big drag on economic recovery. Lending fell by 3% ($210.4 billion) in the third quarter of 2009, marking the steepest drop since the Federal Deposit Insurance Corporation began tracking such data in 1984. FDIC Chairman Sheila Bair said large banks, such as Bank of America, Citibank and JPMorgan Chase, accounted for 75% of the decline.
Another problem causing the shortage of loans is the continuing collapse of many smaller banks.
