A trade group representing 3,000 bank directors is concerned that credit warnings issued by acting Comptroller of the Currency Julie L. Williams will alarm smaller banks and prompt a recession.

"If the banking agencies were to scare banks away from granting not just excessively risky loans, but also prudent loans to their community, then a recession could be triggered simply by the widespread contraction of credit," David Baris, general counsel of the American Association of Bank Directors, warned in an Oct. 9 letter to Ms. Williams.

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