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Fed: Business lending picked up in final quarter of 2011

Jan 03, 2012 Philip Burgess

Large banks have received a barrage of criticism in recent years for holding back lending to small businesses. Many analysts, such as Wall Street Journal contributor Angus Loten, have argued that major banks have been reserving their small business loans for the most profitable and low-risk firms, while average ventures receive next to nothing. However, according to the U.S. Federal Reserve, banks are beginning to pick up their lending activity. A report released this week shows commercial and industrial loans rose at an annualized rate of more than 20 percent in August and more than 15 percent in October. The figures mark the strongest growth in business lending in nearly 10 quarters. "Economists contend the policy reversal by banks is a sign of an improving economy, especially since lenders had been aware for some time of the Federal Reserve's plan to employ tougher new capital standards," reported the Advertising Specialty Institute in a statement. Even so, lenders appear confident that economic conditions will continue to improve in 2012. Earlier this month, Thomson Reuters and PayNet reported the 15th consecutive month of double-digit growth in overall small business lending.