Consumers and businesses found it harder to borrow money over the past three months, the Federal Reserve reported Monday, a sign that the historic credit crunch now hitting the economy is still worsening despite Herculean efforts by the Fed.
More than half of the banks surveyed by the Fed said they had tightened the screws on commercial and industrial loans, commercial real estate loans, residential mortgages, and home-equity lines of credit. Large numbers of banks tightened standards for other types of loans, including consumer credit cards.
Almost no banks eased credit terms for any type of loan, the Fed said in its quarterly senior loan officer survey. Read the full survey results.
Ben Bernanke is no doubt concerned. From Bloomberg:
Federal Reserve Chairman Ben S. Bernanke, seeking to end the worst housing slump in 25 years, urged the government and mortgage lenders to intensify their efforts to avoid home foreclosures.
Bernanke, in a speech in New York today, also reiterated his call for lenders to forgive portions of mortgages for some struggling homeowners. He said proposals should be "tightly targeted" at borrowers at greatest risk of losing their properties, and avoid providing an incentive for defaults.
The Fed chief also backed the idea of having the Federal Housing Administration refinance troubled mortgages...
Bernanke did note that accelerating foreclosures may push home prices down further, hurting the broader economy and threatening the financial system. He anticipated the foreclosure rate will increase this year after such proceedings began on 1.5 million properties last year.