The banks are raising credit standards for loans. Banks are expecting more delinquencies and chrage offs this year.
It seems like the fed lowered the rate more for the credit crunch than the recession. Remember, nothing scares them more than deflation. But if Japan is an indicator, even lowering the rates to zero wont avoid deflation.
The fed can change the liquidity, but they can not change human psychology. Are consumers and lenders psychology turning when it comes to lending and borrowing?
Banks are raising their credit standards for mortgages, consumer loans and commercial real estate loans at a pace never seen in the 17-year history of the Fed's quarterly survey of senior bank loan officers, the Fed said.
The survey backs up the Federal Open Market Committee's comments last week that credit conditions had tightened considerably, a factor that led to the FOMC to slash interest rates by an unprecedented 125 basis points in two weeks.
The Fed remains worried that credit is getting too tight after years of loose standards.
Banks are requiring more disclosures, more collateral and a higher interest rate before approving loans, the survey said. Demand is plunging for many types of loans, especially for residential mortgages and commercial real estate loans.
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