September 15, 2009 / 9:54 PM / 10 years ago

U.S. says banks getting help cut lending in July

WASHINGTON, Sept 15 (Reuters) - The U.S. Treasury Department said on Tuesday that banks receiving government bailout funds cut their new lending by 10 percent in July.

A monthly survey of lending activities at the top 22 banks that have received capital injections showed their overall outstanding loan balance was down 1 percent from June to July because of less demand from borrowers and charge-offs by banks, the Treasury said.

“Total origination of new loans at the 22 surveyed institutions decreased 10 percent from June to July,” the Treasury report said, adding that the value of new loans by all the banks was about $282 billion in July.

The decision to pump taxpayers’ money into banks was motivated largely by lawmakers’ wish for banks to keep lending, but a sluggish economy and more cautious consumers appear to be leading to more cautious use of credit.

Treasury said banks again reported that demand in the commercial real estate and the commercial and industrial loans markets “is well below normal levels,” adding that “none of the respondents predicted change in demand in the near term.”

Banks said real estate developers were reluctant to begin new projects “under current poor economic conditions, which include a rising supply of office space as firms downsize and vacancies rise.”

In addition, total credit card outstanding balances fell by 1 percent from June to July, indicating that consumers were spending conservatively and paying down balances.

“Job losses, generally low levels of consumer spending and higher savings rates contributed to the decline in credit card balances,” Treasury said. (Reporting by Glenn Somerville; Editing by Leslie Adler)

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