To Help Economy More, Time For Banks To Increase Lending

A new Bloomberg View editorial says it’s time for banks to lend more money and catch up with the economy:

There are tantalizing signs that the worst of the disastrous credit crunch may be over. The most tangible evidence can be found in the latest earnings reports from some of the U.S.’s largest banks.

With a few exceptions, financial institutions such as JPMorgan Chase & Co. and Wells Fargo & Co. reported increases in lending to big businesses and, to a lesser extent, to consumers. Since consumers power growth, making up about two-thirds of the U.S. economy, their ability to get credit may determine whether the fragile recovery endures.

There are several things regulators and banks can do to ensure that the lending revival doesn’t fizzle. Although many bankers might disagree, regulators should continue to press banks to increase their capital. As we have argued before, more capital gives lenders a greater cushion to absorb losses, thus lowering risk to the financial system and the economy.