One of the driving factors that made the recession so deep and the recovery so slow was that the credit markets basically froze up. After making so many bad loans, especially subprime mortgages, banks were reluctant to extend new loans in a bad economy. And that made business expansion a difficult proposition.
That's why its important to see loan activity increasing if the economic recovery is to gain steam. The Fed's latest survey of loan officers shows that demand has been growing, and that banks have been lending more to meet that demand. Commercial and industrial loans are currently at $1.62 trillion, which is up 7.5 percent from a year earlier.
The quality of the loans appears to be improving as well. The survey found that 40 percent of the banks expect mortgage delinquencies to decline this year, and 20 to 40 percent expect business delinquencies to decline as well.
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