Will Banks Lend, or Hoard???

     

 Have banks stopped lending?

Actually, no.

Large commercial banks expanded their outstanding loans by almost $200 billion, or 5%, in the four weeks ended Oct. 15, a period that included the passage of the bailout bill. That's after doing little net lending in the first eight months of the year. Small banks showed a much smaller 1.5% increase in loans over the same four-week period.

But it is true, given the extreme market and economic turmoil, these increases may be somewhat misleading. For example, some of the additional lending probably represents corporations drawing down already-existing bank credit lines, rather than banks actually extending new loans. 

Nevertheless, the increase in bank loan portfolios is a step in the right direction.