Fewer households and businesses are borrowing in a market where access to credit remains difficult, according to a Federal Reserve official’s testimony before a Congressional Panel.
Residential mortgage and consumer debt outstanding has fallen sharply through the first three quarters of 2009, and the trend likely persisted through the fourth quarter, said Jon D. Greenlee, the Fed’s Associate Director, Division of Banking Supervision and Regulation. Greenlee testified yesterday before the Congressional Oversight Panel in a field Hearing in Atlanta.
“Some of this reduction in debt represents reduced demand for credit from borrowers who would like to de-leverage. However, access to credit also remains difficult, especially for households and small businesses that depend significantly on banks for financing,” Greenlee said.
The update on access to credit and borrowing trends has not improved much compared to remarks made by Greenlee and other Fed officials last month.
The latest results from the Fed’s Senior Loan Officer Opinion Survey on bank lending practices indicate that both the availability and demand for bank loans “are well below pre-crisis levels,” he said.
“In October, more banks reported tightening their lending standards on consumer and business loans than reported easing, although the degree of net tightening continues to decline from peaks reached in the latter part of 2008,” Greenlee said.
At the 50 largest bank holding companies, non-performing assets continued to climb, raising the ratio of non-performing assets “to 4.8 percent of loans and other real estate owned on bank balance sheets.”
“Loan quality continued to deteriorate for both large and small banking institutions during the third quarter of 2009, the most recent period for which data is available,” Greenlee said. “Most of the deterioration was concentrated in residential mortgages and commercial real estate.”
Click here for Greenlee’s testimony.
