COLUMNISTS On Monday, President Barack Obama pressed 12 large US banks – all recipients of federal assistance – to increase their lending to businesses and consumers. In fact, during the third quarter of 2009, total loans at US banks fell by $210bn (€144bn, £129bn), or 3 per cent, the biggest quarterly decline since 1984.
However, loan volume is not driven primarily by banks. In 2006, before the financial crisis, banks accounted for less than 25 per cent of all credit extended in the US; most loans were originated by non-bank lenders such as auto finance companies, credit card issuers and insurance companies. These non-bank lenders depend heavily on loan securitisation – the process of selling loans to a Wall Street bank, which then creates a pool of loans and sells securities based on the cash flows from these loans. In 2006, the US volume of loan securitisation was $100bn per month; in 2009, this volume is averaging less than $5bn per month.
