Banks are lending again

David Brancaccio Dec 12, 2011

An economy without loans is like a salami sandwich without the bread and salami. Now there news from the Federal Reserve that between July to September this year, bank credit lending was up 10 percent — the highest rate since before the Lehman Brothers collapse in 2008.

Willing banks are a crucial part of a healthy economy. Historically low interest rates have encouraged borrowing, but many banks have been gunshy about letting money out the door. The new data today suggests that’s changing for commercial and industrial lending. The sticking point is lending to individual consumers increased only by 2.2 percent, while real estate lending dropped.

We spoke with Michael Konczal, a fellow with the Roosevelt Institute in New York. He says this increase in lending is a sign that the economy is getting back on track. Still, individual consumers are laying low — many are paying down debts and fighting their appetite for credit. All this means not as much money for the sort of spending that kick starts the economy.

Konczal says there’s no mystery here; we’re still suffering a hangover after one of the worst recessions in our history. There are some green shoots out there, but we’re not out of the woods yet.

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