It looks like banks are lending; it just isn't clear if it's anything other than TARP funds. At least based on the timing and the amounts, it would seem that banks are putting little of their own money at risk. Rather, it appears they are lending only what they know they may not be on the hook for if things go further downhill. JP Morgan Chase (JPM) said on its Q408 conference call:
The TARP is a, depending on how you look at it, a three or five year preferred or something like that and so they’re not directly comparable and we’ll eventually repay the TARP and move on when we get through all this and right now you can’t repay the TARP because part of the agreement was that it wasn’t repayable without being replaced.
And you can’t replace that kind of thing in today’s market.
Maybe now you know exactly how much JPM got from TARP:
In the quarter we extended new credit of over $100 billion... I think we’re speaking for lots of banks here, people are out making loans. This quarter alone I think we did four million new credit cards, so we extended credit card loans, corporate loans, middle market loans, we bought $1.4 billion bond issue when no one else would bid on it from Illinois.
We’ve also in the interbank market we have had on average $40 billion or $50 billion out and into bank market, that is also a form of lending. And all of this is helped by the TARP so we think it’s a valid question people to ask what are doing with the TARP money and we do say its hard to separate exactly what is TARP money because remember we’re making loans all the time but we are trying to follow the intent and spirit of TARP which is to help the economy of the United States recover and make sure we’re financing people.
We even have done some major large syndicated leveraged finance loans and I’ll mention two, [InBev and Mars] but there’s several others. So we’re still in business.
Bank of America loaned $115 billion of its annual $150B loan spend in Q4 alone; just after the bank got TARP funds in Q4. From BofA.’s Q408 conference call: (BAC)
We originated $115 billion in new credit during the fourth quarter alone… Bank of America last year provided more than $150 billion toward lending, investing and grant dollars to America’s small businesses and communities and to support lower to moderate income individuals and communities.
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