As I have noted, the January 2008 Senior Loan Officer Opinion Survey highlighted the fact that many banks are tightening lending standards and terms in a number of credit markets. At the same time, capital at some banks has come under pressure, as institutions have been forced to bring some loans and other securities back onto their own balance sheets.
Because this process is still unfolding, it poses a risk that credit standards for households and businesses could tighten more than expected and significantly crimp spending. Finally, I would note the possibility of a feedback loop between financial market disruptions and deterioration in the real economy that I have emphasized in previous speeches (Mishkin, 2008a, 2008b).