Yep, that financial sector “free money, no strings” bailout last year really looks good right about now. The entire concept, at least as it was sold to the public, was to give banks cash so they could ease the credit crunch and start lending money apace.
Here we are months later and credit is still tight. Very tight.
From the link:
Many banks have made it harder for borrowers to obtain all kinds of loans over the last three months despite a $700 billion federal bailout program and a flurry of other bold moves to stem the worst financial crisis to hit the U.S. since the 1930s.
The Federal Reserve in its quarterly survey of bank lending practices released Monday found large numbers of banks reporting tighter credit standards across a broad range of loan products _ from credit cards and home mortgages to business loans.
Nearly 60 percent of banks responding to the survey said they had tightened lending standards on credit card and other consumer loans, about the same share as in the previous survey released in early November. And about 80 percent of domestic banks said they tightened lending standards on commercial real-estate loans, slightly less than the roughly 85 percent that reported doing so in the previous survey.
All told, though, the proportion of banks that “reported having tightened their lending policies on all major loan categories over the previous three months stayed very elevated,” the Fed concluded.
Greg McBride, senior financial analyst at Bankrate.com, predicted that banks _ whose lax lending standards for home mortgages contributed to the financial meltdown _ won’t be in any rush to loosen lending standards.
“Even when lenders come back to the marketplace and become willing to lend again, who they lend to is not going to change,” McBride said. “The tighter qualification standards that we’ve been seeing are here to stay for the foreseeable future regardless of whether or not there is stress in the credit markets and a deep recession. Lenders won’t go back to giving out credit like candy anytime soon.”