Fed sees easing in lending standards

By Reuters
Posted Aug. 16, 2010 at 1:16 p.m.

The Federal Reserve said Monday that bank lending standards eased somewhat over the last three months while demand for business and consumer loans was largely unchanged.

In its quarterly Senior Loan Officer Survey, taken in July, the Fed found that tight lending conditions, which some economists have linked to the weak economic recovery, were starting to ease.But that was mostly the case at bigger financial institutions, while smaller banks continued to struggle.

With benchmark interest rates effectively at zero, the Fed last week took steps to ease monetary conditions further, announcing it would begin buying Treasury bonds with the proceeds from maturing mortgage debt in its portfolio.

The measure was aimed at spurring ending at a time when economists are worried about the softening pace of the U.S. economic recovery.

A special question added to the July survey found some reticence to lend to European banks in months that saw heightened concern about those institutions amid mounting indebtedness in countries including Greece and Spain.

The Fed’s survey found looser lending conditions for most  commercial and industrial loans.

In a ray of hope for the real estate sector, the Fed found that large banks were more eager to provide credit for home loans. No major changes were observed with regards to loans for commercial real estate.

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