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More Credit Crunch – FYI

February 7, 2008

Banks Make it Tougher to Get a Loan

It got tougher for U.S. companies and consumers to get loans in the last three months, a survey released by the Federal Reserve on Monday shows.

The survey, conducted in January, was available to Fed policymakers last week and helps explain its total 1.25 percentage point rate cut in the last month.

The survey showed that 80 percent of banks raised standards on commercial-property loans — a record. About 55 percent of banks toughened terms for prime home loans, up from 40 percent in October, while 85 percent of respondents made it tougher to get nontraditional loans, up from 60 percent, the survey said.

“It’s definitely a broader-based tightening than we’ve seen before,” says Edward McKelvey, senior U.S. economist at Goldman Sachs Group Inc. in New York. “The economy is weakening, and weakening in a pretty substantial way.”

Source: Bloomberg News (02/05/08)

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