Banks Loans Haven't Recovered From The Financial Crisis And Current Lending Shows Slide Similar To Pre-Recession Data

According to St Louis Federal Reserve research, commercial banks in America are lending half as much as they did before the financial crisis and are currently on a year-long slide towards lending levels of one year ago.

The research indicates that lending peaked in 2006 before taking a four-year slide that saw a lending reduce by 20 percent before bottoming out in 2010. Since then lending has slowly increased, up 15 percent from 2010 to the end of 2012, but since then there has been a long two percent to three percent drop.

While it’s not unusual to see month on month swings, the recent downward trend has been going on for a year and looks similar to the trend that proceeded the financial crisis.

Adam Sarhan of Sarhan Capital believes that this shows banks aren't as reliant as they were 5 years ago to make earnings from lending, especially when it's proven to be a risky area. In Addition, says Sarhan, the Federal Reserve has been keeping rates artifically low and pumping $4 billion a day into the system via quantatative easing and that's proving to be a disincentive for banks to lend.

"The economy is not strong enough to warrant large loans for businesses or consumers. The Housing recovery has levelled off so demand may be somewhat subdued," said Sarhan.