Bankers could shove the economy into a recession if they react to higher delinquency and bankruptcy rates by sharply cutting back consumer credit, Federal Reserve Governor Lawrence B. Lindsey said Thursday.

"Be cautious, be prudent," Mr. Lindsey advised lenders at a conference sponsored by the Consumer Federation of America. "Don't make any sudden decisions."

Evidence that lenders are already pulling back came in a recent Fed study showing most banks less willing to make new loans, Mr. Lindsey said.

That's troubling, he said, because history has shown that when banks retreat from the consumer loan market the economy frequently tumbles into recession.

Mr. Lindsey acknowledged that several reasons exist why banks may be reluctant to lend. Consumers continue to take on record amounts of debt. The average consumer spends $1.10 for each $1 of additional income, he said.

Debt-to-income ratios also continue to grow. Families making $50,000 to $100,000 a year saw their consumer debt totals rise nearly 6% from 1992 to 1995 and their mortgage debt jump 10%.

Bankruptcy filings already have topped one million this year, and Mr. Lindsey predicted they would continue to set records through 2000.

New data on consumer delinquency rates are to be released next week by the American Bankers Association. ABA chief economist James H. Chessen said he expects a slight uptick from the second quarter's 2.32% rate.

"I appreciate Mr. Lindsey's sentiment," Mr. Chessen said. "We don't want anyone overreacting. That doesn't do the banks any good, that doesn't do the consumer any good, and it does not do the economy any good."

Industry officials, however, said they expect banks will provide more than enough credit to keep the economy pumping.

"The elements of a credit contraction and a cutback in spending are there," said James Annable, chief economist at First Chicago NBD Corp. "But the steps banks are taking to slow down the rapid rise in credit availability are not enough to cause a recession. It is just not big enough and does not apply to enough people."

Sung Won Sohn, chief economist at Norwest Corp., said banks are cutting back primarily on solicitations to low-income borrowers, who have had the highest default rates.

"There are no problems for middle- and upper-income borrowers," Mr. Sohn said. "If anything, banks are trying harder in areas where there are not very high delinquency rates."

Jeff K. Thredgold, chief economist at Cleveland-based KeyCorp, said so many lenders are in the consumer credit market that a credit crunch is highly unlikely.

"Banks and credit card companies have tightened a bit," he said. "But they have not overreacted. Any bank that tightens its credit standards extremely aggressively is simply not going to get business."

Mr. Lindsey agreed a credit crunch and ensuing recession are not preordained. Banks have more than enough capital to weather an increase in delinquencies and bankruptcies, he said.

"Banks have largely reserved against potential losses," he said, "and the outlook for the sector is quite healthy."

Low unemployment also should cause personal incomes to rise modestly in the next few years. That should allow consumers to pay down their debts with only a slight decrease in spending, he said.

"We are going to have to see how this works out, and hopefully we won't go into a recession," Mr. Lindsey said.

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