Most U.S. banks tightened lending to consumers and businesses in recent months, an ominous sign for an economic recovery pegged to easing the flow of credit to borrowers.
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Deepening trouble throughout the financial system and the economy has spurred banks to become more cautious about lending practices, directing loans to the most creditworthy customers. The tightening policies are weighing on economic activity and threatening to worsen the recession, which is entering its 15th month.
The government has rolled out numerous programs to grease credit flows to businesses and consumers. The first half of the $700 billion financial-sector rescue to the banking system was intended to spur more lending from financial institutions. But with banks proving slow to ramp up lending, lawmakers now want to place requirements on firms that receive taxpayer funds.
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"We see TARP as an insurance policy. That when all this stuff is finally over, no matter how bad it gets, we're going to be one of the remaining banks."
-- John C. Hope III, Chairman of Whitney National Bank
Labels: Markets
