First-quarter results from the four biggest banks have been upbeat and have given markets confidence that the credit crisis is waning. Bank of America, JPMorgan Chase, Citigroup and Wells Fargo posted combined profits of $13.4 billion in the three months ended March 31. "This quarter is confirmation that credit has turned a corner," said Charles Peabody, an analyst at Portales Partners.
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Bank of America, GMAC Financial Services and other companies are selling bonds at a pace that could make this the busiest week so far this year. "It tells us that financial liquidity is very much on the rise," said John Lonski, chief economist at Moody's Investors Service. "No longer do corporations suffer from a dearth of liquidity. This puts them in a better position to take advantage of opportunities that arise."
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Wells Fargo Bank has lent $350 million to clean-technology companies under a group it formed to target this sector. Called the National Cleantech Group, the new unit was formed last fall and now has 100 clients, many of them in the solar-energy sector.
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For the fourth straight month, consumer spending in the U.S. increased. The 0.5% boost in purchases in January exceeded expectations and offered an indication that consumers may help spur the recovery. "I view the consumer as playing a secondary role, not leading the recovery but going along for the ride," said Nigel Gault, chief U.S. economist at IHS Global Insight. "As employment improves then consumer spending will be growing."
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Analysts said a wave of foreclosure on commercial properties likely will hit community banks especially hard. "There's been an enormous bubble in commercial real estate, and it has to come down," said Elizabeth Warren, chairwoman of the Congressional Oversight Panel. "There will be significant bankruptcies among developers and significant failures among community banks."
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Columnist Holman W. Jenkins Jr. explains how the thinking about the global financial crisis may be shifting away from blaming the banks. As the Financial Crisis Inquiry Commission is poised to consult with academic experts, the panel should revisit the question of whether the banks were insolvent or victims of a liquidity panic, Mr. Jenkins wrote.
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The Treasury Department said loan origination by 11 banks that received money through the Troubled Asset Relief Program increased 13% in December compared with November. The Treasury also said the total loan balance dropped 1% during the month. Bank of America reported the most new loans at $64.6 billion, nearly a third of the total reported by the lenders surveyed.
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After three years of homeowners' equity contracting in the U.S., the longest ever, the trend has reversed. The Federal Reserve's "flow of funds" survey shows that between the first and third quarters of 2009, homeowners' net equity increased almost $1 trillion.
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