Survey: Banks Tightening Credit

By Russ Wiles
azcentral.com
Feb 5, 2008

A report released this week by the Federal Reserve indicates banks are tightening credit, and that isn't good.

The Fed's quarterly survey of senior loan officers found:

• About one-third of banks reported tightening lending standards on commercial and industrial loans over the past three months.
• About four in five say they've tightened standards on commercial real estate loans.
• About 60 percent have made it harder for consumers to obtain home equity lines of credit, although only about 10 percent of banks have tightened credit-card standards.

The survey also revealed that two in five banks have increased interest-rate spreads, partly offsetting the series of recent central bank rate cuts.

All in all, the survey isn't welcome news for those worried that the nation has entered a recession.

"Despite the Fed rate cuts to date, banks have continued to tighten credit further. If a recession has indeed begun, tighter bank credit will like make matters worse," noted Scott Anderson, an economist at Wells Fargo.