A new report from the Federal Reserve shows that banks have begun easing their standards on various types of loans, which should be a boon to the economy. Even though interest rates of all kinds have been low for a long time now, that doesn't do much good if banks are still reluctant to make loans. But over the past three months, “Domestic banks, on balance, continued to report having eased their lending standards across most loan types," the Fed said yesterday.
For consumer borrowing, the biggest easing has occurred for car loans and credit card debt. Standards for other consumer loans is reported as largely unchanged. Commercial and industrial loans are also surging: The total of $1.45 trillion for the week ended July 25 marks a three-year high for that figure. The total of commercial lending has now increased for eight straight quarters.
Interestingly enough, only about one fourth of the banks attribute the easing of lending standards to the sluggish economy. The remainder said they were forced to increase their loan portfolios because of increased competition from other lending sources.
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