Newspaper article THE JOURNAL RECORD

Pending Changes Should Help Ease Business Loan Red Tape

Newspaper article THE JOURNAL RECORD

Pending Changes Should Help Ease Business Loan Red Tape

Article excerpt

WASHINGTON (AP) _ Federal Reserve Chairman Alan Greenspan said Wednesday that a pending package of rules to ease banking regulations should help to boost bank lending but is not a cure-all for the credit crunch facing businesses.

The new regulations, which are scheduled to be released within days, are expected to ease some paperwork burdens imposed on banks and make it easier for them to make loans to people they know based on their character rather than a strict cash-flow analysis of a given loan.

The rules changes are being pushed by President Clinton as an integral part of his short-term program to get the economy growing at a faster pace by alleviating roadblocks that have kept banks from making new loans to small businesses.

Greenspan told the House Budget Committee on Wednesday that the Fed, which regulates large bank holding companies, was working closely with other federal regulators "to ensure that undue impediments to credit flows are removed."

Many small businesses across the country have complained that they can no longer obtain loans for credit-worthy enterprises and that local bank officials are blaming overzealous federal regulators for the "credit crunch."

Greenspan said the rules changes being considered would help address this problem but that the bigger impediment was not federal rules but fears among bankers following a wave of bad loans that engulfed banks and savings and loans during the 1980s.

He said that a number of bank loan officers had been "scared half silly" following a period of rather lax lending practices and now were overreacting in the other direction.

"The major problem we have here is fear on the part of bankers and that is not easy to resolve," Greenspan said. He said that he hoped the regulatory changes would help but he warned that it would not be easy "to change human nature."

Greenspan expressed disappointment that more than a year of efforts to boost bank lending had not yet succeeded.

"The results to date in trying to break the back of this credit crunch have not been acceptable. …

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