Credit Continues To Become Tighter In The U.S.

Credit Continues To Become Tighter In The U.S.
November 4, 2008 6:10 a.m. EST



AHN Staff
Washington, D.C. (AHN) - A Federal Reserve survey discovered that 85 percent of U.S. banks tightened their lending standards for the third quarter, which was up from the 60 percent that made such measures and responded to the Fed's June poll.

About 95 percent of the banks said more stringent lending requirements were imposed on large and medium-sized businesses borrowers. For credit card debts, 60 percent of the banks said they tightened standards and 65 percent made similar measures against other types of consumer loans for the third quarter.

The stricter standards were applied against prime mortgage loans, nontraditional mortgage loans, subprime mortgages and loans granted to borrowers with weak credit ratings.

The survey, conducted during the first two weeks of October, covered 55 American banks with combined assets of $6.2 trillion and 21 foreign financial institutions.

Richmond Fed president Jeffrey Lacker opined the tougher loan standards may be one of the reasons why the Fed reduced benchmark interest rates by 1 percent last week. Chris Rupkey, chief financial economist of the Bank of Tokyo-Mitsubishi, told Bloomberg, "It has never been harder for business and individuals to get a loan from the bank... Banks are turning away borrowers left and right."