What Is The Real Story With The Senior Loan Officer Opinion Survey

The Senior Loan Officer Opinion Survey on Bank Lending Practices for January 2009 was just released by the Federal Reserve. The universal headline from most media outlets ran something like this - "Banks Continue To Restrict Lending."

While this is technically correct, there is some interesting data in the release. The survey asks 25 questions to domestic lenders, many of which are multi part, and then another series of questions to foreign banks with domestic locations.

1) The fraction of banks that are tightening lending standards overall actually declined from October 2008.

"Relative to the October survey, these net fractions generally edged down slightly or remained unchanged."

The level is still "elevated" however.

2) The fraction of banks that are tightening lending standards for Commercial Real Estate also declined from October 2008.

"80 percent of domestic banks reported that they had tightened their lending standards on commercial real estate (CRE) loans over the past three months, slightly less than the roughly 85 percent that reported doing so in the October survey."

Once again, still elevated.

3) The fraction of banks tightening standards on Home Equity Loans also fell from the last survey.

"About 60 percent of domestic respondents, down from 75 percent in the October survey, noted that they had tightened their lending standards for approving applications for revolving home equity lines of credit (HELOCs) over the past three months."

I'm not saying everything is going great out there. So what's the point of all this? Don't believe everything you read. It wasn't that long ago that we were being told that Oil prices were never going to go down, and that Fannie Mae and Freddie Mac were the greatest companies in the world.

Go to the original source and draw your own conclusions. The sky is not falling and the world is not coming to an end, although that seems to be the general consensus out there.