The January survey indicated that commercial banks generally ceased tightening standards on many loan types in the fourth quarter of last year but have yet to unwind the considerable tightening that has occurred over the past two years. The net percentages of banks reporting tighter loan terms continued to trend lower.2 Banks reported that loan demand from both businesses and households weakened further, on net, over the survey period.
For many major loan categories covered by the survey, the net percentages of respondents that tightened standards in the fourth quarter of 2009 were close to zero. However, banks continued to tighten a number of terms on loans to both businesses and households, although the net fractions of banks that reported doing so in the January survey generally stepped down again. Banks' policies on commercial real estate lending were an exception, as large net fractions of respondents further tightened their credit standards during the final quarter of last year. In addition, banks reported that they had tightened terms on CRE loans substantially over the past year.
Demand from both businesses and households for all major categories of loans weakened further, on net, over the past three months. The net fractions of banks that reported weaker demand for business loans continued to decline, while changes in the comparable readings on demand for loans to households were mixed.
Here are the relevant charts from the report. Click on all charts for a larger image:
The percentage of lenders tightening standard for commercial and industrial loans (C and I loans) is now at 0. However, loan demand is still weak.
The percentage of lenders tightening standard for commercial real estate (CRE) loans is decreasing, but loan demand is still weak.
The percentage of lenders tightening standards for consumers loans is now at 0, but demand is still weak.
The percentage of lenders tightening lending standard for residential real estate loans is decreasing, but demand also dropped last quarter.
2 comments:
"loan demand is still weak"
You don't say.
Obviously, from the statement cited, tightening of lending standards has dropped but only because the vast majority of lenders had already tightened lending standards. There is no indication that any of them are loosening lending standards.
Because of this loan demand can only get weaker. The destruction of people's credit scores due to charge-offs, foreclosures, and bankruptcies not to mention the high number of delinquencies will prolong this situation for many years into the future.
In fact, absent a return to less than prime lending, credit fueled growth will be suppressed for the better part of a decade. But if we go back to that, especially in big ticket items like houses and cars we will take the economy off a cliff again rather quickly.
This is why, as I have previously commented here and elsewhere, that this particular "recession" isn't any different than the Great Depression in terms of how we will get out of it. And that is: the jobs have to come back first or we will suffer through a long-term repeat cycle of destruction that comes with much political and societal discord.
If this is the process that the "solvers" of the problem have in mind then all we have is the 100 car pileup running in slow motion. We still end up with a massive amount of carnage and damage only it took much longer and created more ancillary destruction than otherwise would have occurred if we just went straight off the cliff in the first place.
The situation with lending today is no different than that faced only a few years ago - they are running out of qualified borrowers. And that leaves only two avenues to go down. Re-blow a bubble by lending to less qualified borrowers or blow up a good portion of the previously qualified borrowers with a stagnant economy and low velocity of money.
Of course, if the top one percent were to decide to give back some of their ill-gotten gains and put that back into ordinary Americans in the form of increased wages and jobs then there will be a way out. Alas, I don't expect them to volunteer such a solution.
Post a Comment