The Journal this morning has some good reporting on the failure of TARP to stimulate lending, its second very good report in the last few days.

It says ten big banks that got money dropped their total loan balances by 1.4 percent, or $46 billion, from September to December despite getting $148 billion from the government.

The overall decline in loans on the 13 banks’ books — from about $3.36 trillion as of Sept. 30 to $3.31 trillion at year’s end — raises fresh questions about TARP’s effectiveness at coaxing banks to reopen their lending spigots.

“It has failed,” said Campbell Harvey, a finance professor at Duke University’s business school. “Basically we have dropped a huge amount of money … and we have nothing to show for what we actually wanted to happen.”

But the Journal shows that it’s not as simple as bankers sitting on their hands: This isn’t exactly the best environment to lend money.

They say it takes time to make prudent loans and to attract new deposits that will allow them to lend out their new capital efficiently.

Demand for low-risk loans is also ebbing as consumers and businesses rein in their spending and try to conserve cash, according to bank executives. Even though mortgage rates are down, for example, applications in the week ended Jan. 16 declined about 10% from the previous week…

Still, the paper doesn’t let the banks—or the government—off the hook for the failure of TARP to boost lending:

The fact that loan portfolios are shrinking at many of the largest TARP recipients underscores how few strings Treasury Department officials attached to the infusions. That has made it hard to prevent banks from using the money to pay dividends, make acquisitions and fund bonuses for top executives.