Banks ease up on business loans; consumer debt still tight

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The Federal Reserve’s latest quarterly survey of bank lending practices shows credit conditions are improving somewhat for business borrowers -- but not for consumers.

About 40% of domestic banks reported tightening credit standards for commercial and industrial loans to business borrowers in the last few months, down from 65% in the January survey, the Fed said today.

‘Although 40% is still very elevated, the April survey marks the first time since January 2008 that the proportion of banks reporting such tightening fell below 50%,’ the survey said.

On the consumer-lending side, however, ‘nearly 60% of respondents indicated that they had tightened lending standards on credit card loans, about the same proportion as in the January survey,’ the Fed said.

About 49% of banks said they had made prime home loans tougher to get in the last few months, up slightly from 47% in the January survey.

At the same time, bankers acknowledged that demand for home loans had surged as mortgage rates fell to record lows, spurring a refinancing boom.

The Fed’s quarterly bank-lending report was based on a March 31 to April 14 survey of 53 domestic banks and 23 foreign banks with U.S. offices.

As banking becomes ever more politicized (the price of the federal bailout), continued tightening of consumer-lending standards will give more ammunition to bank critics who say lenders are unfairly penalizing individual borrowers.

The House last week passed the so-called credit cardholders’ bill of rights. President Obama summoned credit-card lenders to the White House on April 23 to read them the riot act over ‘unfair rate increases’ and other alleged abuses.

-- Tom Petruno