The credit drought might or might not be breaking, but it looks like many potential borrowers couldn't care less.
More than a year into Washington's massive effort to restore credit availability, many U.S. businesses and consumers are shunning loans.
It has been reported that the Federal Reserve's recently released loan officer survey showed credit remains tight. Less attention has been paid to weakening credit demand.
The Fed's survey suggests interest in consumer, mortage, business and commercial real estate loans is still weak and, in most cases, continues to shrink.
The survey showed more lenders reported weaker than stronger demand for C&I loans.
The report continued to show a near-record balance of lenders reporting less of a need for commercial real estate loans.
More lenders reported weaker interest in consumer loans.
The best news ("best" only in a relative sense) was that a larger percentage of firms continued to report greater rather than weaker demand for prime mortgage loans, but that balance of sentiment shifted toward weakness again in the third quarter. Firms reporting less interest in nontraditional mortages continued to outnumber those reporting more, and by a greater extent than in the second quarter.
In other words, even if credit weren't tight, fewer want it.
It's another sign the top priority now for many in the U.S. is to pay off debt, rebuild savings and restore balance sheets while adjusting to the "new normal." Borrowing to spend and expand operations -- you know, the things that make an economy grow -- doesn't seem to be much of a priority at this point.
This isn't a recovery yet. It still looks more like bottom fishing.
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*The Fed didn't have enough lenders reporting subprime lending to produce a constitent time series for all mortage loans going further back in time.
**The net percentage figures are calculated by taking the percentage of firms reporting stronger demand minus the percentage of firms reporting weaker demand. In other words, it shows the balance of lenders seeing stronger demand versus firms seeing weaker demand.
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