Big banks have some nerve!

Struggling banks that have received gobs of government money are busy putting out press releases to remind us that they're still banks. Duh!

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By Paul R. La Monica, CNNMoney.com editor at large

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In which institution are your savings the safest?
  • Community bank
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  • Nationwide chain of banks
  • Credit union

NEW YORK (CNNMoney.com) -- Business may be slow for the nation's big banks -- but their public relations departments sure are busy!

Several recipients of government bailout money have recently put out flowery press releases, and in one case, even an advertisement, about their efforts to save the economy.

Last week, Bank of America (BAC, Fortune 500) unveiled what it called the Lending & Investing Initiative, which the bank described in gushing terms as "a comprehensive plan to track and report on Bank of America's business activity in 10 areas key to reviving the nation's economy."

Included in the release was this nugget of information, which doesn't exactly inspire confidence, if you ask me. "[CEO Ken] Lewis will receive regular reports on economic trends and implications for each of the segments housed under the Lending & Investing Initiative."

Really? Wasn't Lewis, whose firm has received $45 billion in funds from the Troubled Asset Relief Program, or TARP, staying on top of economic trends before? He's the CEO of a bank for crying out loud! This is supposed to be something new?

On Monday, Wells Fargo (WFC, Fortune 500) felt the need to point out in a press release that it will soon pay the government $371.5 million in dividends on the $25 billion in preferred shares that the Treasury invested in the bank last fall.

That's all well and good. But paying the dividend is something that the bank is required to do. In fact, a spokesman for the Treasury Department said late Tuesday that five other banks had already paid their dividends on preferred shares. So big whoop. Should I put out a release to tell the world that I paid my mortgage on time?

Citigroup (C, Fortune 500) takes the prize for sheer brazenness. The bank on Tuesday issued its first of what it is dubbing a quarterly progress report on its use of TARP capital.

The bank, which had to be convinced by the Obama administration that buying a new $50 million corporate jet was not a good idea right now, had the audacity to title its report, "What Citi is Doing to Expand the Flow of Credit, Support Homeowners and Help the U.S. Economy."

In Citi's 43-page report, CEO Vikram Pandit talked about the bank "working in partnership" with the government and that the bank understands TARP is "about helping the American people, and supporting U.S. businesses and our communities."

Wow. What gall!

Citi has received $45 billion in bailout money as well as federal guarantees on more than $300 billion in loans. Its stock has plunged 90% in the past year. It has laid off more than 50,000 workers. Meanwhile, it may stick with a $400 million, 20-year naming rights deal for a new baseball stadium in Queens.

Perhaps it should have named the report "What Citi is Doing to Expand the Cash Flow of Short Sellers, Support Pawn Shop Owners and Help the New York Mets re-sign Oliver Perez."

(Note to aforementioned PR folks, who inevitably will take issue with that previous paragraph: I am aware that Citi said no TARP money is being used for marketing. So that last part about the Mets is a joke. But not the stuff about the short sellers and pawn shops...although Citi definitely isn't supporting one particular pawn shop in Brooklyn, N.Y.)

Now don't get me wrong. It's nice to see that banks are in fact using bailout money to lend. That's been one of the biggest criticisms of the bailout by members of Congress and many taxpayers.

Citi said in its release Tuesday that it made $75 billion in new loans during the quarter, with $36.5 billion backed by TARP funds. Wells said that it made more than $70 billion in loans, most of which were mortgages, in the fourth quarter.

And last week, JPMorgan Chase (JPM, Fortune 500), which received $25 billion from TARP, pointed out in a full-page ad in The New York Times that it loaned more than $100 billion in the fourth quarter.

But aren't the banks merely confirming to everyone that they are still banks, i.e. that their business is to lend money?

All this reminds me of a great bit in a Chris Rock stand-up special from a few years ago. His response to people who bragged that they take care of their kids was this: You're supposed to! What do you want, a cookie?

Credit still tight, despite what press releases say

What's more, one expert said it's difficult to pinpoint with certainty what any specific amount of money is being used for in a bank's day-to-day activities.

"Clearly, these [press releases] are designed to make a political case so people should have somewhat of a jaundiced eye," said Daniel Alpert, managing director of Westwood Capital, a New York-based investment bank. "These institutions receive cash everyday. If they choose to say that a certain amount of cash went here or there, that's somewhat manufactured."

And what's even more troublesome is that there is a disconnect between what these banks are touting in their press releases and what loan officers at banks across the country told the Federal Reserve about lending activity in the fourth quarter.

According to the Fed's latest survey, released on Monday, credit is still extremely tight.

For example, almost 80% of all banks responding to the survey indicated that standards for approving commercial real estate loans got tighter.

Nearly half of the banks said their standards for approving mortgages to prime borrowers (i.e. people with good credit) were tougher, while about 60% of the banks disclosed that they were more stringent in approving credit card applications.

Finally, the Fed said that lending standards for commercial and industrial loans to large and mid-sized businesses remained above the peak levels they hit during the last recessions in 1990 and 2001.

In other words, you have some big banks putting out press releases that essentially are saying, "Hey. Look at us! We're still lending! Honestly!" But the data from the Fed paints another picture entirely.

I am not suggesting that banks go back to the days of approving anything with a pulse for a no-money-down option ARM that's destined for default.

But until banks start to lend more freely to responsible individuals and businesses that deserve credit, we will remain in this recession.

"Every metric we look at shows that loan standards are tightening now, which is kind of like closing the barn door after the horses have gone," said Barry Ritholtz, CEO and director of equity research at research firm Fusion IQ and author of the soon-to-be-published book "Bailout Nation." To top of page

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