New York and Chicago note that some existing programs are being stretched out rather than being reduced. Cleveland, however, cites announcements of substantial reductions in the steel and rubber industries. Weakening cash flow and declining market demand are the most common reasons given for delays and cutbacks. Recent easing of credit restraints and lower interest rates do not appear to have increased consumer borrowing. Atlanta reports that many banks are aggressively seeking new loans, but Cleveland notes that banks have been reluctant to lower interest rates.
Some banks report that interest rates have been slow to adjust to weakening demand.
Industrial loans have dropped because smaller business firms fail to qualify, while large firms have access to commercial paper markets. A rise in bankruptcies, especially among auto dealers and home builders, is reported by Chicago area bankers as a result of the recession and new bankruptcy laws. Thrift institutions have been aggressive in lower mortgage rates, but note only a mild pickup in inquiries. Loan commitments have been slow to respond because of a recognition lag and consumer uncertainty about the economy. Thrift institutions across the nation are experiencing sizable increases in deposit flows, which are frequently used to rebuild liquidity positions and repay borrowings.