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The credit crunch is officially over

August 12, 2013: 2:27 PM ET

Banks are finally lending more than when Lehman fell, but much of the new lending is going to corporations.

citi-bank-of-america-chase-banks-monsterFORTUNE -- We are officially uncrunched.

For the first time since the start of the financial crisis, banks have more lent out then they did in late 2008. In mid-July, according to the Federal Reserve, which reports the figures with a lag, banks had $7.33 trillion in loans outstanding. That was slightly more than the $7.32 trillion banks had extended in October 2008, the last time credit peaked.

But the growth in lending has remained slow and uneven. Lending in the first three months of the year dropped, before rebounding in the second quarter. And much of the rebound in lending has been to corporate borrowers.

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The volume of commercial and industrial loans outstanding is up 27% in the past two years, according to Bankregdata.com. Consumer mortgage credit, however, is up just 4% in the same time, despite a recent refinance boom, which appears now to have peaked. Very little mortgage lending was for new purchases. Credit card lending is up less than half a percent. Auto loans, though, are up 15%.

Credit crunches are rare in American economic history, and don't tend to last long. It took slightly more than a year for lending to recover after the early 2000s recession. Credit grew slowly in the late-1980s and early 1990s, but never really dropped. The recent credit crunch, which clocks in at just under five years, appears to be the largest and longest in the Federal Reserve's database, which only goes back to 1947.

Along the way, economists have debated whether the credit crunch was being driven by banks being unwilling to lend, or from a lack of demand for loans from borrowers. Many politicians blamed the banks. It does appear that getting a home loan became much tougher after the financial crisis, though many would argue it was too loose before it. And recently deposits at the banks have been rising faster than loans, meaning less of the money people are putting into banks is making its way back out into the economy.

Bill Dunkelberg, NFIB's chief economist, says his surveys of small business owners throughout the credit crunch show that there was little drop-off in the ability of small businesses to get loans. "What we really saw was a near record high percentage of businesses who don't want a loan," says Dunkelberg.

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Still, there are positives signs that lending growth will continue, albeit slowly. The Federal Reserve's most recent survey of lenders found that banks are finally making it easier for individuals to get home, car and credit card loans. The survey also said that the trend toward easier loans for businesses is improving. And the ratio of loans to deposits rose for the first time in over a year, though at just over 70% it is still near all-time lows. Banks used to lend out 90% of their deposits.

In a recent analyst note, Sterne Agee bank analyst Todd Hagerman predicted that lending will pick up in 2014 and 2015, though he still expects the growth will be about half what it was in the mid-2000s. That, of course, could be a good thing.

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About This Author
Stephen Gandel
Stephen Gandel

Stephen Gandel has covered Wall Street and investing for over 15 years. He joins Fortune from sister publication TIME, where he was a senior business writer and lead blogger for The Curious Capitalist. He has also held positions at Money and Crain's New York Business. Stephen is a four-time winner of the Henry R. Luce Award. His work has also been recognized by the National Association of Real Estate Editors, the New York State Society of CPA and the Association of Area Business Publications. He is a graduate of Washington University, and lives in Brooklyn with his wife and two children.

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