Credit Crunch May Be Over, Fed Indicates : Economy: A new survey of the nation’s banks shows that they have stopped tightening lending standards.
Results of a new survey of banks suggests that the worst of the credit crunch may be over, the Federal Reserve Board said Wednesday
An October poll found that nearly all the banks surveyed said they had not changed their credit standards for approving business loan applications since an August survey.
“In light of the historical tendency of banks to report that they have tightened standards, the virtual absence of reported tightening of standards . . . might be interpreted as indicating that standards actually have been eased,” the central bank said in a footnote to the survey summary.
Fed Chairman Alan Greenspan has blamed banks in part for the credit crunch, which he said was partly responsible for the “demonstrably sluggish” economy. The Bush Administration has put pressure on bank examiners to ease rules to make credit available to sound borrowers.
But the survey also found weakened business demand for loans from domestic banks in recent months, although there was some evidence of strength at foreign banks. The poll included both domestic and foreign banks operating in the United States.
“Demand for consumer installment loans also weakened recently, as did demand for home equity loans (though to a lesser extent),” the summary said. At the same time, “banks’ willingness to provide consumer credit over the last three months appeared to increase some.”
Other surveys have found consumer confidence plunging recently over concern about jobs and income, suggesting that consumers were in no mood to borrow even if money were available.
The Fed survey also found that the number of banks reporting further tightening of standards for commercial real estate loans declined markedly, while few banks indicated tighter standards for residential mortgages.
The Federal Reserve has been surveying senior loan officers at 60 banks, including the nation’s largest, to track the credit crunch.
