Brookings is out with a study about the large banks post 2007 financial crsis lending….
The cry by many and the Fed’s for the banks to stop making short term loans that might be risky has dried up the banks lending money….
Those banks have NOT been growing…
They ARE profitable because they have cut their risk…But they ain’t lending like they used to….
The Free – For – All days are over…..
And the Banks have changed ….
Is all of this good for the nation’s economy ?
During the crisis itself, federal banking and financial regulators and the Treasury encouraged three of the four large banks to take over other banks that were in financial trouble as a way of containing the effects of the crisis. JPMorgan took over Bear Stearns and Washington Mutual; Bank of America took over Countrywide and Merrill Lynch, and Wells Fargo took over Wachovia; Citibank did not make significant acquisitions. Given these sizable purchases one might reasonably expect that this meant the largest banks would grow even faster as a result of the crisis and they would hold a larger share of total bank assets. We set out to find if that did indeed happen – and it didn’t. The Big Four’s rate of growth dropped to 1.8 percent a year from 2009-2014 and their share of total assets actually declined slightly, from 52.5 percent in 2008 to 51.2 percent in 2014.
We also looked at changes in the composition of bank assets and liabilities. We found that the banks cut back on their reliance on short term wholesale funding, consistent with the direction of their regulators. And the banks experienced large increases in the volume of deposits they hold. Once the crisis occurred, though, the growth of loans dropped sharply relative to the amount of deposits. Because of a reluctance to lend, a lack of demand for loans, or some combination thereof, the intermediation process at banks – providing funding for investment and growth — has not been working in the same way as before the crisis….
The author of the piece….Martin Neil Baily