Total amount of loans held by banks drops in second quarter

As bankers and borrowers remain hesitant to take risks, the total number of loans held by 15 large U.S. banks dropped 2.8 percent in the second quarter, according to the Wall Street Journal, and this number is not expected to grow until the second half of 2010. The steepest decline in loan portfolios was at Dallas-based Comerica, where the loan total was down 4.3 percent in the second quarter. Supporters of the federal bank bailout said the capital infusion was not meant to expand loan volume, but to prevent a collapse, which it did. However, banking analysts said the fact that less than half of the loan volume is coming from new loans shows that the economy is still far away from a recovery. “You are looking for net new loans in the marketplace to be a signal of true change, and we have not seen that yet,” said Christopher Marinac, research director at FIG Partners in Atlanta.

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