Fed says banks eased loan terms as demand increased in 1st Quarter

April 30, 2012 by · Leave a Comment
Filed under: Industry News 

Well you already should know what I would, I’ll say it anyways.

Not sure that EASING, lending standards is the best course of action when demand increases.  That is close to what got us in our last crisis.   When we lower lending standards on home loans, guess what, demand increase for the cheaper credit.   Now I do have faith in the banks that this easing in the lending standard probably was not anywhere as drastic then the 2001-2007 time-frame but I am just saying, this logic they laid out in the article is at least different enough, that is got me to read it and write on here.

Please, bankers and risk officers everywhere, lets not repeat the same trap again.   Our recovery will be long and slow and this is a good sign of a healthy, real and sustainable recovery.   We don’t need cheap money right now.  What we need is more good ideas and businesses to invest in so we can create the jobs that we need in America.  Ok, all done.

Bloomberg: U.S. banks saw increased demand for lending in the first quarter and made loans easier to get, according to a Federal Reserve survey.

“Domestic banks generally reported having eased their lending standards and having experienced stronger demand over the past three months,” the Fed said today in Washington in its quarterly survey of senior loan officers. It said the number of banks reporting eased standards and improved demand, rather than the reverse, was “modest.”

Fed Chairman Ben S. Bernanke this month cited improving credit conditions as removing a restraint to faster growth that should allow the economy to “approach more quickly its longer- run full employment level.” In its April 25 statement, the Federal Open Market Committee said it expects growth to remain moderate over coming quarters and then to “pick up gradually.”

The Fed said in its survey that banks were more likely to ease than tighten terms on business loans to firms of all sizes amid increased competition from other banks and non-bank lenders.

Banks saw easier standards and strengthening demand for commercial real-estate loans, a “moderate” strengthening in demand for prime residential mortgage loans, and easier standards for most types of consumer loans.

Source

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