WASHINGTON — Fewer banks are tightening loan standards, but credit constraints on U.S. businesses and consumers don’t figure to let up until at least the middle of next year.
In its July survey of loan officers released Monday, the Federal Reserve found that 30 percent of 55 domestic banks toughened criteria for obtaining commercial and industrial loans, compared with 40 percent in April and a peak of about 85 percent in November. The steadily improving credit conditions come as the American economy shows signs of emerging from a deep recession.
But most loan officers also said they didn’t expect their banks’ lending standards to return to normal until the second half of 2010 at the earliest. That could prove to be an obstacle to a recovery if a lack of credit further constrains businesses from investing and households from spending.
Disappointing reports on retail sales and consumer confidence last week have heightened worries on Wall Street and among economists of a “consumerless” recovery. Consumer spending accounts for about 70 percent of U.S. economic activity.
Separately, the Fed said Monday that it would extend into 2010 an emergency financing program with the Treasury Department aimed at boosting consumer and business lending. The Term Asset-Backed Securities Loan Facility, or TALF, was launched in March to provide funds for investors to buy securities backed by auto and student loans, credit-card debt and business debt, including commercial real-estate mortgages.
The program, set to expire this year, was not expanded Monday but will run through March 31 for most loan types.
“Conditions in financial markets have improved considerably in recent months,” according to the Fed. “Nonetheless, the markets for asset-backed securities backed by consumer and business loans and for commercial mortgage-backed securities are still impaired and seem likely to remain so for some time.”
The credit situation for residential real-estate loans was somewhat better. The survey found 22 percent of banks had tightened standards in home- mortgage lending for prime borrowers, compared with 49 percent in April.
“Many consumers and businesses are in ‘save mode’ and are not demanding much credit,” said Sara Kline, an economist at Moody’s , in her analysis of the Fed survey. “The perception of tighter credit standards on the part of consumers may be keeping some would-be borrowers from applying for loans altogether.”
