Economy

Regulators give guidance to lenders in wake of financial relief program

Federal regulators urged banks to maintain reasonable lending standards amid the financial crisis, but warned lenders that excessive tightening could cause further damage to the economy.

The government agencies also said that they expect banks to work with home owners to avoid any foreclosures that can be prevented.

In a joint statement from the Department of Treasury, the Federal Deposit Insurance Corporation, and the Federal Reserve, the country's financial regulators detailed their expectations after the government has made hundreds of billions of dollars available to the banking industry to help ease the crisis in financial markets and to aid in bolstering the economy.

"The ongoing financial and economic stress has highlighted the crucial role that prudent bank lending practices play in promoting the nation's economic welfare," the joint statement read. "The recent policy actions are designed to help support responsible lending activities of banking organizations, enhance their ability to fund such lending, and enable banking organizations to better meet the credit needs of households and business."

Last month, the government put in place a $700-billion financial relief program. While the overall plan was originally designed to remove toxic mortgage-related assets from financial institutions, the government has slated the first $250 billion from the fund to buy direct equity stakes in financial institutions.

(Published by RTTNews - November 12, 2008)