Yesterday, Treasury announced the release of its February monthly lending report. The announcement summarized information provided by the 21 largest recipients of government funding under the Capital Purchase Program. According to the summary, “banks continued to originate, refinance and renew loans in the period from January to February 2009.” Residential mortgage lending was the primary source of bank lending for the period. Attractive mortgage rates and refinancing opportunities led to a high number of residential mortgage applications in the months of December and January. As a result, Treasury expects residential mortgage originations to continue to lead all other forms of bank lending through the first quarter of 2009.

Lending in each of the other classes, however, reportedly decreased during the period. Loan origination and lending activities related to (i) consumer loans, including auto and student loans; (ii) credit cards; (iii) commercial and industrial lending; and (iv) commercial real estate lending lessened in February, as economic conditions weakened demand for these other forms of debt by businesses and consumers alike. With respect to the decrease in commercial and industrial lending, for example, banks cited “softened demand for capital expenditure loans and loans to finance acquisitions, plants, equipment, inventory and accounts receivable” as businesses remained “focused on preserving liquidity and strengthening their balance sheets.” Although Treasury’s release indicated that overall lending remained constant, others viewed the decreases in these other classes in a more negative light.