Largest banks that received government aid cut lending in 4Q

WASHINGTON -- The 20 largest banks that received government rescue funds slightly reduced their lending to consumers and businesses in the last three months of 2008, the government said Tuesday.

The Treasury Department said the banks reduced their mortgage and business loans by a median of 1% each, while credit card lending rose by a median of 2%. The median is the point halfway between the banks that lent the most and those that lent the least.

The department said lending likely would have fallen further without the roughly $200 billion that has been provided to banks so far, given the sharp downturn in the economy.

The data is from the first in what the department says will be a series of monthly reports on the banks' lending. The report did not provide total lending amounts in each category.

"Loan activity was resilient in the face of the worst economic downturn in decades," the department said.

The report also said that banks reduced new commercial real estate loans by 19%, while increasing loan renewals by 55%.

The department said less demand for loans and tighter underwriting standards by the banks restrained lending activity in the fourth quarter.

Lending dropped from October to November, the department said, and then picked up from November to December. That uptick was partly a result of an increase in mortgage applications, the report said, as mortgage rates fell sharply in response to a Federal Reserve program to make home loans cheaper.

The Federal Deposit Insurance Corporation's decision last fall to guarantee new debt issued by financial institutions also likely boosted lending totals, the department said.