MarketWatch: Credit squeeze getting worse, banks say

Credit squeeze getting worse, banks say
Most banks less willing to lend to businesses, consumers
By Rex Nutting, MarketWatch



WASHINGTON (MarketWatch) -- The credit squeeze worsened in the past three months, the Federal Reserve reported Monday, and most banks expect to keep a lid on credit for the next year at least.
Despite all the aggressive moves by the Fed in the past year to ease the flow of credit to the economy, a record percentage of banks were making it more difficult for borrowers in the three months ending in July, the Fed said in its quarterly senior loan officer survey of 52 major banks.

A majority of banks tightened their rules for granting loans to businesses and consumers. The survey shows little appetite at banks to lend for home mortgages, credit cards, home equity loans, commercial real estate loans, or commercial and industrial loans.

No bank in the survey eased credit terms for any type of loan in the past three months, and only one bank said it anticipated easing standards for consumers in the next 12 months.

Tighter credit could slow economic growth, especially consumer spending, economists say. Lack of credit could sink the commercial real estate market, and curb capital investments by businesses. The survey is considered a leading indicator of credit creation in the United States.

"This is consistent with our view that consumer spending will slow markedly over the next several quarters," wrote economists for Lehman Bros.

"The impending tightening may ultimately curb consumer credit noticeably," wrote Harm Bandholz, an economist for UniCredit Markets. "This in turn would be another nail in the coffin of the U.S. consumer, who is already suffering from the weak labor market, high inflation and falling house prices." .......(more)

The complete piece is at: http://www.marketwatch.com/news/story/story.aspx?guid=83C9D9AF-C73B-40B4-B5CE-D51C27E9E0B5

Well duh.