AMERICAN banks have turned into giant mutual fund managers, swapping commercial and industrial loans for the relatively safe haven of government securities, according to an American economist. HSBC Holdings (USA) chief economist Lacy Hunt said figures from the Federal Reserve show real commercial and industrial loans have been falling since 1990, and are down to 1984 levels as the commercial banks shun risk in the wake of the savings and loan crisis. He said: ''It is a mark of the lack of confidence of the business executive to do anything beyond what their cash flow allows them to do.'' At the same time, the ratio of bank investment in government securities to commercial and industrial loans has soared from an average of about 60 per cent to 110 per cent - and is still climbing. ''Banks have become like giant mutual funds. It is a symptom of cautiousness and abnormality,'' Mr Hunt said. Despite an aggressive push by the banks to throw loans at would-be borrowers, new loans are swamped by the existing ones in dollar terms and they cannot achieve normal volumes. He said: ''This suggests to me that consolidation in the banking sector in the US still has further to go. We will see more mergers and a further decline in employment. ''It is a competitive environment within the US, and the assumption has to be that prudence demands that environment is going to persist until further notice. It requires a very prudent and risk-averse approach.'' Banks will still have money-making opportunities open to them - treasury markets, government portfolio and interest rate spreads - although they may find their options trimmed.