How the Financial Crisis Made Big Banks Bigger

By Daniel Indiviglio
The Atlantic

Banks are finally beginning to lend, the big ones that is. Commercial and industrial lending is up this quarter 0.2% from the third quarter, according to Moody's Analytics. That might not sound like much, but it's the first quarterly increase in two years. This is great, right? After all, if banks are lending more to businesses, they can expand and begin to hire. That's true, but this trend reveals something else: the financial crisis has created an environment where big banks are getting bigger, as the small ones struggle.

This report comes from Ruth Simon at the Wall Street Journal. Here's how it starts:

Some big U.S. banks are starting to increase their lending to businesses as demand for loans rises and healthier banks seek to grab customers from weaker rivals.

After declining steadily for most of the past two years, the amount of commercial and industrial loans held by commercial banks inched upward during the past two months, according to the Federal Reserve.

Unfortunately, the article is a little thin on hard macro-level data that supports this claim. Instead, it provides some anecdotal examples of big banks increasing their lending. JP Morgan's middle market lending is up 7% this year, while its small business lending is up more than 40%. Wells Fargo is also more liberally extending credit to businesses.

But even without a concrete comparison of the lending of big banks and community banks, the observation makes sense. Earlier this week we noted that many small banks who accepted bailout money are in jeopardy of failing. Hundreds have not yet paid back their bailout money. Meanwhile, the larger banks all seem to be faring pretty well, having mostly paid back what they owed the government.

(More here.)