Banks have returned to the period when a rough economy kept them out of the loan business. This is particularly bad news for those seeking mortgages and small businesses. Unfortunately, these two type of loans will have to rebound if housing and unemployment are to return to pre-recession levels.

The October 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices issued by the Federal Reserve reports:

Regarding lending standards, fewer domestic banks eased standards and terms on commercial and industrial (C&I) loans over the third quarter compared with recent quarters, particularly on loans to large and middle-market firms.

The situation for personal lending was little better, although there was some demand among consumers:

On the household side, demand for loans to purchase homes reportedly increased, though those reports may reflect the moderate rise in refinancing activity.  Demand for home equity loans decreased, and demand for consumer loans reportedly was little changed

Although the Federal Reserve continues to keep interest rates at historic lows, banks will not begin to become more active unless the federal government gives them incentive to do so.

Douglas A. McIntyre

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.