More Banks Tighten Lending Standards

Wall Street Journal (08/12/08) P. A3; Reddy, Sudeep
The ongoing credit crisis could take a toll on the U.S. economy well into 2009, as evidenced by the growing number of banks that are tightening their lending criteria. A recent Federal Reserve poll of senior loan officers found domestic banks growing increasingly cautious in their lending to consumers, with 66 percent of them tightening lending terms between April and July for credit cards and other consumer loans. The credit tightening is expected to hit the troubled housing market hard, weighing on both home sales and prices. Nearly three out of four banks--an increase from 60 percent in April--confirm that they have tightened lending standards for prime mortgages, almost 50 percent said they would tighten further in this year's third and fourth quarters and 33 percent plan to tighten standards during the first and/or second quarters of next year.