WASHINGTON -
The Federal Reserve board released its periodic survey of senior loan officers at 56 domestic banks and found widespread pessimism toward the economy–an attitude that is also working to restrain lending.
Nearly 65% of bankers polled said the unfavorable economic outlook was behind their decision to tighten standards on commercial real estate loans. A third of the group said the economic uncertainty contributed to tougher standards on commercial and industrial loans.
More than 83% of respondents expect lower loan quality on commercial and industrial loans and 87.1% said quality will decline on commercial real estate loans.
The outlook on the residential sector also was grim as 70.4% are preparing for lower quality on prime mortgages and 82.1% have low expectations for nontraditional residential mortgages.
More than 71% of the bankers expected subprime loans to continue losing quality.
