Treasury: Loans held by big bailout banks fell in March

The value of loans held by the 21 largest U.S. institutions getting federal bailout support fell in March, although the companies did boost new lending for the first time this year.

The Treasury Department said today the average loan balances at the largest bailout recipients dropped to $4.38 trillion, down 0.9 percent from February. The average total of loans had fallen 0.4 percent in February.

The administration has argued that the decline in lending at banks that have received billions of dollars in bailout support was not an indictment of the program. Officials have said lending would have contracted even more without the rescue program.

The Treasury report also showed that originations for new loans rose significantly in March, climbing 26.9 percent to $294.8 billion, after having fallen in January and February. But the figure was skewed because the data were not adjusted to account for three more business days to make loans in March than in February.

The average total of loans held at the top 21 banks has fallen for four of the past five months, a fact the administration says reflects the country’s severe recession. The government has argued that the $700 billion financial rescue fund was needed to bolster banks’ tattered balance sheets and encourage them to boost lending to consumers and businesses to keep the recession from worsening.

However, critics contend the government has not done enough to ensure that the money banks were receiving to bolster their capital reserves was being used for its intended purposes.