The Federal Deposit Insurance Corp. said on Tuesday that lending by U. S. banks fell in 2009 to $587 billion, down 7.5 percent from 2008.

The Washington Post reported that it was the largest yearly decline in U. S. bank lending since the 1940s. The number of banks designated as at risk of failure increased to 702 during 2009, a 64 percent increase over the number of troubled banks at the close of 2008.

Financial weakness has caused some small banks to cut back on lending, but she said reduced lending by the largest banks contributed most to the overall drop in lending said FDIC Chairman Sheila Bair.

She said as the FDIC issued a quarterly report on U. S. banking," Large banks do need to do a better job of stepping up to the plate here."

The Post further said that the Obama administration plans to promote lending by small banks with $30 billion in proposed new federal aid into community banks.

A figure that represented an increase over 2008 profits, an estimated 8,000 U. S. banks reported aggregate profit of $12.5 billion last year. But more than one of every three banks reported fourth-quarter losses.

According to the report a larger number of banks report they are returning to profitability and the FDIC says it expects loan delinquencies will decline after peaking this year. (With Input from Agencies)