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FDIC Encouraging More Loan Offers

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Banks and credit card lenders have significantly increased the number of offers they make to consumers for new lines of credit in the last several months, but one top government official says more can be done to promote a healthier economy.

Martin Gruenberg, the acting chairman of the Federal Deposit Insurance Corp., says that while the amount of lending by banks in particular has been on the rise in each of the last few quarters, efforts to step up even more would have a significant positive impact. The latest data from the FDIC shows that bank loan balances rose $130.1 billion in the fourth quarter of last year, up 1.8 percent from the previous quarter, and while there are still a number of economic concerns these financial institutions face, there is a lot of room for broadened lending.

“The industry is now in a much better position to support the economy through expanded lending,” Gruenberg said. “However, levels of troubled assets and ‘problem’ banks are still high. And while the economy is showing signs of improvement, downside risks remain a concern.”

The most significant uptick in lending was noticed in business loans, which rose by $62.8 billion, while mortgages rose $26 billion and credit card balances $21.3 billion, the report said. It marked the third straight quarter in which bank loans have grown, and was the largest increase observed since 2007, just prior to the start of the recent recession.

Banks have generally been broadening their credit qualifications to expand the number of borrowers they have in the last year or so. Many subprime consumers are now being granted credit cards for the first time in years, as the competition for all borrowers has increased considerably.

In addition, consumers appetite for new lines of credit is growing at the same time. The number of new credit card accounts opened during the last few months of 2011 increased significantly, as consumers continued to find themselves on more solid financial footing and felt comfortable in dealing with debt again. During the recession, millions turned away from credit card use for everyday purchases and many eschewed these accounts altogether. But data suggests consumers’ balances grew significantly in the final quarter of the year, though many attribute that to increases seen every holiday season.

Image: Ryan McFarland

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