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FDIC: Bank Loans Soaring, Risk-Taking Begins

Banks in the U.S., trying to fight back revenue declines, “boosted lending in the second quarter at a pace unseen since the financial crisis,” according to an FDIC report, the Wall Street Journal is reporting.

“The Federal Deposit Insurance Corp. said banks’ loan and lease balances rose to $8.11 trillion, a 2.3 percent increase over the first quarter of 2014 and the largest quarter-over-quarter jump since the end of 2007,” the Journal reported. “It was the first time U.S. bank lending has topped $8 trillion, as banks boosted construction loans, agriculture loans, credit-card balances and auto loans. Mortgage lending also was up compared with the first quarter but down from the year-ago period, reflecting a retreat from that market by some banks amid new regulatory and legal risks.”

The story quoted FDIC Chairman Martin Gruenberg saying that this is a crucial development, as banks tried to transition from a slow and painful recovery to a period of more aggressive risk. “We are moving into a different stage of the financial and economic cycle,” the story quoted Gruenberg saying. “The industry, I think, is well positioned, having strengthened its balance sheet to respond to increasing credit demand, but that changing environment is going to carry risks and challenges for the industry as well.”

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