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US Banks Expand...

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U.S. banks, criticized for prolonging the economic downturn by sitting on billions of dollars from the government bailout, are stepping up to the plate and gaining market share in the capital equipment financing space, according to new data from PayNet Inc.

PayNet, which tracks trends in the commercial lending market, told Reuters on Thursday that banks originated 51 percent of all equipment financings in 2008, up from 43 percent in 2007.

The banks accomplished that feat by effectively retreating from the market more slowly than their competitors.

Capital equipment loan, lease and line of credit originations tumbled 24 percent in 2008, according to PayNet, pulled down by a 44 percent decline in originations by independent lenders and a 28 percent decline in originations by captive finance companies. Meanwhile, bank originations fell only by 11 percent last year.

"The populist opinion out there is that the banks are taking the money and not doing anything with it," PayNet President Bill Phelan told Reuters.

"This review shows that banks are now the primary providers of commercial credit to small and medium-sized U.S. businesses."

A key factor in the sharp pullback by captive and independents has been the problems in the securitization market since mid-2008, including the equipment finance ABS market, which has left non-bank lenders unable to meet demand for commercial loans.

That is why the captives and independents pushed the Obama administration and the U.S. Federal Reserve to expand the so-called Term Asset Backed Securities Loan Facility, or TALF for short, to include commercial loans such as equipment leases and lines of credit.

On Thursday, the Federal Reserve heeded those calls, expanding the program to securities backed by mortgage servicing advances, floor-plan loans, loans or leases relating to business equipment and leases of vehicle fleets.

The TALF is intended to jump-start securitization markets that have collapsed since the bursting of the U.S. housing bubble forced a large number of mortgages into default.

In the March, TALF funding, the Fed pledged to lend up to $200 billion to support securities of new and recently originated auto, credit card, student and small business loans.

"This step will help provide much needed liquidity to the secondary market for equipment finance assets, while unlocking the equipment finance ABS market," said Kenneth Bentsen, the president of the Equipment Leasing and Finance Association, a trade group representing capital equipment lenders.

PayNet, which collects real-time loan information from more than 200 leading U.S. capex lenders, mined its database at the request of Reuters to see how the market was changing.

Of the $1.1 trillion invested in plant, equipment and software in 2006, about 55 percent, or $600 billion, was financed through loans, leases and lines of credit from the companies represented by ELFA, according to a 2007 study by Global Insight.


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