Economic slowdown fears increase as tighter loan standards are applied
The Federal Reserve has said that banks have had less of a demand for mortgages and commercial loans between May and July. This only adds to the evidence that has been compiled to show that the pace of economic growth has truly slowed down. Of course, it does not help that 56% of lenders have tightened their standards, which really hurts those consumers who have bad credit. All of this is causing a lot of worry even though the commercial real estate market is currently soaring and only home building is still in recession. The true extent of the problems here may not be seen quite yet though since this “survey” was completed before last week’s stock and bond market meltdown occurred. It was at this time that the Federal Reserve had to pump liquidity into the banking system in order to keep its key short-term interest rate at 5.25%. This was also meant to reassure lenders that the Fed would not let credit markets freeze up. All of this has forced dozens of lenders out of business, sparking wide concern about just how sound bonds really are. It has also contributed to market volatility and caused many people to worry about just how sound other investments truly are.