(Over a recent lunch, an executive for a state wide bank mentioned the national fall off in loan demands and also that consumer debt was also shrinking. He attributed it to “Too much uncertainty.” Neither bode well for recovery of the economy.)
THE MORNING CALL:
The nation’s historic drop in loan volumes in 2009 didn’t miss the Lehigh Valley, with some of the region’s largest banks that received hundreds of millions of dollars in federal investment reporting year-over-year declines in lending from 2008 to 2009.
Construction lending led the downward slide due to the floundering real estate market, local lenders say. The absence of speculative real estate investing –– where developers buy tracts of land and subdivide them into residential lots –– all but vanished in 2009, dragging down loan gains banks made in other sectors.
Other factors decreasing loan volume are declining property and equipment values and shrinking business inventories, which are all used as collateral against loans. When property used to secure a loan is worth less or business inventories used as collateral are depleted, banks can’t lend as much against them, local lenders say.
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