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Wednesday, November 25, 2009

As PA banks jack rates, firms borrow less but towns borrow more

It's bad times when Main Street gives up on borrowing money - while City Hall keeps trying to borrow more.

That's what's going on in Pennsylvania, according to a new report from the Chrostwaite Institute, an affiliate of the Pennsylvania Association of Boroughs. The group surveyed 16 senior lending officers (that's who replied, of 60 surveyed), and found that, in July, August and September:

- 38% of the banks set tougher standards for businesses to borrow money. None made it easier
- 56% charged more for loans, compared to what it costs them to raise money.
- 69% said they're making smaller loans; most are demanding borrowers show they're more solvent.

Why are banks charging more, when the Federal Reserve is giving them cash almost free so they can lend it? Either because there's less competition and they see a chance to boost profits - or they're afraid more people won't pay it back.... As a result, not surprisingly:

- 38% of banks say businesses are applying for fewer loans; only half that many say demand is up.

But not everyone's borrowing less: 37% of banks said local governments and noprofits tried to borrow more money over the past two years. And 63% expect they'll try to borrow more next year.
Posted by Joseph N. DiStefano @ 12:00 PM  Permalink | Post a comment
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About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
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