Ratcheting things up

So, having let one horse (subprime mortgages) get out of the barn, the credit industry proceeds to put double locks on all the doors that are already secure:

In the October survey, about one-fifth of domestic institutions, on balance, reported that they had tightened their lending standards on C&I loans to large and middle-market firms over the past three months relative to the previous three months.
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About half of the domestic and three-fourths of the foreign respondents reported a tightening of lending standards and terms on backup credit lines for single-seller, multi-seller, and other types of asset-backed commercial paper programs.
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40 percent of respondents indicated that they had tightened their lending standards on prime mortgages...
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one-fourth of domestic banks—up from about 10 percent in the July survey—reported that they had tightened their lending standards on consumer loans other than credit card loans over the past three months... A few banks indicated a diminished willingness to make consumer installment loans relative to three months earlier. -- Federal Reserve's October 2007 "Senior Loan Officer" Survey

Well, the banks do need to cover their subprime losses and assure their investors that they won't screw up again. But those tighter standards will put viable businesses out-of-business, if they lose short-term borrowing ability. And tighter standards on consumer loans will impact everything from car sales to vacation travel. (But there'll be plenty of money at credit-card rates!)

Easing interest rates won't help borrowers if the only kind of loans they can get are the 25-percent APR kind. Not to mention the political consequences of a 20% spread between Fed rates and loans that people can actually get.


Via: MaxedOutMama, who has more.

Posted by: Old Grouch in In Passing at 23:59:01 GMT | No Comments | Add Comment
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