Morning Brief: Banks Struggle To Lend With Bailout

Bethesda's EagleBank received $38.2 million from the Treasury Department in early December. The bank, which focuses on lending to local businesses, used roughly half the money to digest the acquisition of Fidelity & Trust Bank, a Bethesda rival with financial problems. And it has struggled to use the rest to increase lending.

The federal government has invested almost $200 billion in U.S. banks over the last three months to spark new lending to consumers and businesses. So far, it hasn't worked. Lending has declined, and banks that got government money on average have reduced lending more sharply than banks that didn't. Staff writer Binyamin Appelbaum has the full story here.

Jeanine Wilson continues to struggle despite modifications to the mortgage on her Upper Marlboro home. Her first modification, in May, increased her payments by $200 a month after her lender attached late fees and the missed payments. The second modification came after she was laid off as a social worker for the District government.

Her interest rate was reduced, andnu she was holding two new jobs, but she still continued to miss payments, she said.

"They just kept saying they were in the business of making money, not in the business of helping you save your home -- either you pay it or you don't pay it," Wilson told staff writer Renae Merle.

Merle writes on Tuesday that many homeowners who have been given a break on their troubled mortgages quickly end up in trouble again, a growing problem that is bedeviling efforts to stem rising foreclosure rates.

In other news, D.C. government officials said on Monday they expect to spend money from President Obama's economic stimulus package to narrow a $456 million budget gap next year, counting on funds that have yet to be approved by Congress to avoid deep cuts in city services.

And a German auto parts manufacturer owned by Carlyle Group declared bankruptcy yesterday, causing the District-based private-equity giant to lose its $180 million investment.

By Alejandro Lazo  |  February 3, 2009; 8:55 AM ET  | Category:  Carlyle , Morning Brief
Previous: Morning Brief: Automakers Set For DC Show | Next: Morning Brief: Corporate Executive Board Makes Cuts


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