Fewer US Banks Tighten Lending Standards
THE WALL STREET JOURNAL
Tue May 5, 2009
By JON HILSENRATH AND KELLY EVANS
Of THE WALL STREET JOURNAL
Although credit conditions remain strained, an April survey of loan officers by
the Federal Reserve found a smaller number of banks were continuing to tighten
loan standards, compared with a few months ago.
Glimmers of improvement were most notable in commercial lending. The Fed said
40% of the 53 domestic banks it surveyed between March 31 and April 14 said
they tightened standards on commercial and industrial loans, a smaller
percentage than the 65% that said in January that they tightened standards.
"The April survey marks the first time since January 2008 that the proportion
of banks reporting such tightening fell below 50%," the central bank said. When
banks tighten standards, they make it harder to get a loan by toughening
certain criteria, such as for income, cash flow or indebtedness.
In the period, banks were also a little less aggressive about demanding more
for the loans they actually made. Some 80% said they toughened terms on loans
-- for instance, increasing the interest rate -- when compared with some
benchmark. That was down from the 95% that said in January they demanded a
higher rate.
About 65% of banks said they tightened standards for commercial real-estate
loans, down from 80% in January. It was the first time since October 2007 that
the percentage of banks tightening standards on commercial real-estate loans
fell below 70%.
Consumer lending was mixed. While there was a greater percentage of banks
tightening criteria for mortgage loans, the percentage doing so for home equity
and certain other consumer loans eased a bit.
Meanwhile, increases in housing-market activity and construction spending were
the latest signs of a brighter outlook for the economy.
Pending sales of existing homes rose in March for the second straight month,
the National Association of Realtors said Monday. It marked the first
back-to-back gains in that index in nearly a year, and the latest hopeful sign
for the housing market. Pending sales serve as a leading gauge, as they are
based on contracts signed but not yet closed.
The Commerce Department said Monday that spending on construction projects rose
0.3% to $969 billion in March, the first gain in six months. Spending was down
on residential construction but strong for nonresidential projects
