The Federal Reserve has just released its bi-annual survey of risks facing the U.S. economy, and they warn of a coming “sharp contraction” of bank lending. The key quote from the report, as reported by the Washington Post, is:
“Despite decisive actions by the Federal Reserve, the [Federal Deposit Insurance Corporation], and the U.S. Department of the Treasury, concerns about the economic outlook, credit quality, and funding liquidity could lead banks and other financial institutions to further contract the supply of credit to the economy,” the report read. “A sharp contraction in the availability of credit would drive up the cost of funding for businesses and households, potentially resulting in a slowdown in economic activity.”
