Fed survey shows majority of banks still tightening credit

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Most banks still are tightening the screws on borrowers, despite the government’s efforts to ease credit conditions by injecting lenders with federal money.

The Federal Reserve’s latest survey of bank lending, reported today, showed a majority of banks made it harder to get loans in the last three months -- although in some loan categories the percentage tightening credit was down from the Fed’s October survey.

Overall, the report will give the Obama administration another reason to hold bankers’ feet to the fire before approving more government help for lenders.

Highlights from the Fed’s bank survey:

-- A net 64% of domestic banks said they tightened lending standards on commercial and industrial loans to large- and mid-size companies in the last three months, down from the 84% that said they had tightened in the October survey. That’s progress, although not compared with a year ago, when just 32% of banks said they had made loans harder to get.

-- Smaller companies found it tougher to get loans at a net 69% of banks in the last three months, compared with 75% in the October survey.

-- Even if they weren’t otherwise tightening loan standards, most banks were raising the rates they charge for credit, the Fed said. ‘Around 90% of domestic banks indicated that they had increased spreads of loan rates over their cost of funds’ for commercial and industrial loans, the survey found. ‘Likewise, very large fractions of banks reported having charged higher premiums on riskier loans and having increased the costs of credit lines to firms of all sizes over the survey period.’

-- Commercial real estate lending standards were tightened by 79% of domestic banks, compared with the 87% that reported making those loans harder to get in the October survey.

-- Consumers with good credit should have found it somewhat easier to get a mortgage: The percentage of lenders tightening standards on prime home loans fell to 47% in the latest survey from 69% in the previous survey.

-- But credit cards were no easier to get: 59% of banks set higher standards for credit card customers in the last three months, the same percentage as in the last survey.

-- Tom Petruno