Wisconsin banks are lending and outperforming their peers nationally
WBA Press Release, April 30, 2009

MADISON—The lending practices of Wisconsin’s FDIC-insured depository banks are generally misunderstood. Here are the facts:

• Total loans by Wisconsin banks rose 5.7 percent in the 4th quarter of 2008 (most recent figures available).
• The consolidated loan-to-deposit ratio in Wisconsin is 108 percent, compared to a national ratio of 85 percent. This means the average bank in Wisconsin is lending $1.08 for every dollar received on deposit.
• The TARP funds held by 13 Wisconsin banks (less than 5 percent of all Wisconsin banks) participating in the Capital Purchase Program (CPP) are voluntary, not a bailout. Banks must make quarterly 5 percent dividend payment to the U.S. Treasury. Wisconsin CPP participating banks will pay over $123 million per year in CPP dividends to the U.S. Treasury.
• Lending is how banks make money. Simply put; Wisconsin banks, whether they are participating in CPP or not, are lending.
• Studies on credit availability conducted recently by the Federal Reserve Bank of Minneapolis and the National Federation of Independent Businesses show that banks continue to lend to “creditworthy” small businesses, but that fewer businesses meet that definition due to impaired cash flow or devalued collateral.
• There are factors beyond banks’ control affecting credit availability, including the skyrocketing cost of FDIC deposit insurance premiums; mark-to-market accounting rules; a recent 15 percent corporate tax increase; intense regulatory pressure to tighten lending standards; and lower loan demand.
• There are also fewer overall total sources of credit due to the exit from the marketplace of many non-bank lenders. Case in point, the so-called “shadow banking industry,” which included insurance companies and mutual funds, accounted for 33 percent of the credit in the U.S. economy compared to 22 percent for FDIC-insured depository banks. The shadow banking industry has all but evaporated during the current economic downturn. Banks are slowly filling the vacuum but can’t immediately bridge the entire void and it is unfair for critics to suggest otherwise.

The numbers cited above prove that Wisconsin banks are lending, but they are doing so prudently. Banks didn’t make the risky loans during the lending boom and it is irrational to think they would now.