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 August 21, 2009

Fewer Banks Tightening Lending Standards
The Federal Reserve reported this week that fewer of the country's banks are tightening their lending standards. A positive sign, yet normal availability of credit will probably not return until sometime next year. Both the Federal Reserve and the Treasury have extended the TALF emergency financing program which was aimed at assisting lending.
The number of banks that have tightened standards has decreased nearly forty percent since April of this year. Credit conditions have shown steady improvement across the country as a sign that the economy is slowly emerging form a deep recession.

The majority of lenders surveyed state that they do not see lending conditions returning to normal until well into next year. This slow return to regular lending conditions could prove to be a further hindrance to businesses and consumers.

This information comes on the heels of disappointing numbers regarding consumer confidence and spending. Overall consumer spending makes up nearly 70% of our economy, and consumers have not returned to regular spending patterns amidst ongoing concerns.

The Federal Reserve is also very concerned about the current state of the commercial real estate market. Many previously-issued loans are coming due in an already distressed market. An increased number of defaults and foreclosures in the commercial sector are anticipated, prompting many banks to further tighten their commercial lending standards.

The lending situation for the residential real estate market is more positive. A recent survey of lenders showed that twenty-two percent of banks had tightened their standards; this figure is down from nearly 50% just in April of this year.