America's banking institutions haven't halted all lending, according to a letter to the editors of The Wall Street Journal. It appeared in the Feb. 2 issue and was submitted by Ed Yingling, president and chief executive of the American Bankers Association in Washington, D.C.
The letter stated that loan demand has declined, "which is typical in a recession, as consumers, many of whom are concerned about job security, choose to hold onto their cars and homes and businesses. With fewer customers, businesses have a reduced need to finance inventory, buy equipment or expand operations. As the economy weakens, fewer businesses and individuals qualify for loans.
“Nevertheless, banks have continued to lend. Bank lending actually increased in 2008, although as the recession deepened at the end of the year, lending probably decreased marginally. Because banks now provide less than one-third of the credit in the economy, it is a challenge for them to offset the decline in volume from nonbank lenders. Ignoring the bigger economic picture and the cause-and-effect relationship between a recession and borrower behavior misses a critical point. Banks want to lend. It’s what they’re in business to do and what they will continue to do.”
Source: Nation's Building News,American Banker Association Says Banks Continue to Lend