Bank lending policies become more strict

WASHINGTON – Many banks have made it harder for borrowers to obtain all kinds of loans over the past three months despite a $700 billion federal bailout program and a flurry of other bold moves to stem the worst financial crisis to hit the country since the 1930s.

The Federal Reserve in its quarterly survey of bank lending practices released Monday found large numbers of banks reporting tighter credit standards across a broad range of loan products.

Nearly 60 percent of banks responding to the survey said they had tightened lending standards on credit card and other consumer loans, about the same share as in the previous survey released in early November. And about 80 percent of domestic banks said they tightened lending standards on commercial real-estate loans, slightly less than the roughly 85 percent that reported doing so in the previous survey.

All told, though, the proportion of banks that “reported having tightened their lending policies on all major loan categories over the previous three months stayed very elevated,” the Federal Reserve concluded.

The survey was based on the responses of 51 domestic banks and 23 U.S. offices of foreign banks.

Under the $700 billion bailout program enacted in early October, the government has pledged to inject $250 billion into banks in return for partial ownership. Treasury Secretary Timothy Geithner is exploring other ways to provide relief, including the possibility of buying rotten mortgages and other toxic assets now weighing down banks’ balance sheets.

The Federal Reserve has slashed a key interest rate to record lows and rolled out radical programs to, among other things, provide cash loans to banks, buy mounds of short-term debt from companies and purchase up to $500 billion in mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.