Credit Crunch

Bill Seidman had a strained relationship with the Treasury Department. His meetings with Treasury Secretary Nicholas Brady rarely went well. His meetings with Deputy Treasury Secretary John Robson were far worse. Brady and Robson generally wanted Seidman to follow Treasury's lead, but Bill Seidman never followed anyone's lead.

As chairman of the FDIC, Seidman liked to point out that the FDIC was an “independent” federal agency. It did not report to the Treasury Department. This annoyed Treasury's senior officials. Conversely, the FDIC's employees, myself included, loved that Seidman allowed our voice to be heard.

As the weakness in the economy and in the banking industry unfolded in the early 1990s, the need for interaction between Brady and Seidman heightened. One day the Washington, D.C., weather was comfortable enough that Bill and I walked the long block from the FDIC's headquarters on 17th Street, past the White House, to the Treasury Department's headquarters on Pennsylvania Avenue for a meeting with Secretary Brady. When we arrived, the security guards were slow to let us into the building. This could have been because someone on our end had not provided them with the necessary security clearance information, or it could have been that they had misplaced that information. But the lengthy delay was all that Bill needed to storm out of the building and head back to his office. As we walked back past the White House to the FDIC, it was not lost on me that we had just stood up the Secretary of the Treasury.

My concern turned to amazement when within half an hour Nicholas Brady showed up at Seidman's office ready to hold the meeting there. Perhaps it was a peace gesture on Brady's part. Perhaps the issues were too important to wait. The meeting took place, but the tension remained.

It wasn't just officials at the Treasury Department who were annoyed with Bill Seidman; the frustration extended next door, to the White House. President George H. W. Bush's chief of staff, John Sununu, figured that if Seidman would not listen to Treasury, he should at least listen to the White House. Sununu was a powerful personality, and he was accustomed to getting his way.

The backdrop to the tension was that by early 1990, commercial banks across the country were losing money. They were feeling the effects of the weak economy and the downturn in commercial real estate markets. Each week, more commercial banks were becoming insolvent and were being shut down. The cost of these bank closings was placing a growing strain on the FDIC's bank insurance fund. Some experts were asking questions about whether the fund was on the verge of insolvency.

A number of ideas were proposed for how to recapitalize the fund. Sununu wanted to raise the money by placing a tax on all insured bank accounts. He reasoned that insured depositors benefited from deposit insurance, so they should pay for it.

Putting the burden directly on depositors rather than on the banks themselves was unlikely to be well received, regardless of what Bill Seidman said about it. But Bill had a way of creating a lasting image when he wanted to get a point across.

Before President Carter signed the Depository Institutions Deregulation and Monetary Control Act in March 1980, banks weren't allowed to pay customers interest rates on their deposits that exceeded certain caps. Without being able to offer prospective customers more money, the only way they could compete effectively for new business was to offer other incentives. One common gift was a new toaster. Seidman said that Sununu's plan meant that instead of the bank offering the depositor a gift, the depositor would have to give the bank a gift.

Henceforth, Sununu's idea became known as the “Reverse Toaster.” It wasn't just dismissed—it was ridiculed. Sununu was embarrassed, and Seidman had another powerful enemy. Sununu told anyone within hearing range at the White House that he was going to tell Seidman exactly where he could stick his damn toaster.

It may have just been a coincidence that after Bill fell off his horse at his ranch in New Mexico, broke his hip, and needed surgery, Treasury Department officials thought that it would be a good time to brief President Bush on the weakening condition of the banking industry and the bank insurance fund. Seidman called me from his hospital bed in New Mexico and asked me to go to the meeting at the White House in his place.

I was excited to meet with the president and was prepared to tell him that the FDIC's bank insurance fund was almost out of money. The Treasury Department officials wanted me to state the situation clearly to the president, but they did not want me to make any specific proposals. They wanted more time to devise a solution, and they were concerned that the senior administration officials in the room were so accustomed to making decisions that they might settle on a particular option in the meeting. With the president in the room, it would be difficult to change that decision at a later date if it became necessary to do so.

As they conveyed these concerns to me, the Treasury Department officials were hopeful but probably not certain that I would listen to them. I'm sure they were worried that even from his hospital bed Seidman might want me to use this opportunity to have his recommendations circumvent Brady and Sununu and go directly to the president. But those fears were misplaced since Bill never gave me any instructions other than to present the facts clearly to the president.

The meeting took place in November 1990. The president had his top advisers with him. They included Sununu, Office of Management and Budget director Richard Darman, and Commerce Secretary Robert Mosbacher. The financial regulatory agencies were well represented: Treasury Secretary Brady, Federal Reserve Chairman Alan Greenspan, FDIC Vice Chairman Andrew “Skip” Hove, Federal Reserve senior officials Don Kohn and Bill Taylor, and Assistant Secretary of the Treasury John Dugan.

Before I spoke, the president asked me to send Seidman his best wishes for a speedy recovery. I started my presentation by stating that any further deterioration in the economy or the failure of a large bank could require emergency action to prevent the insolvency of the bank insurance fund. I suggested that a recapitalization of the fund was necessary.

The president was visibly concerned and took copious notes. He asked a series of questions trying to better understand parts of my presentation. For example, he wanted to know why various government agencies, such as the Congressional Budget Office and the General Accounting Office, had slightly different projections. I explained that while they were more optimistic under current market conditions, their forecasts under a weaker economic scenario were equally pessimistic, and the weaker scenario was a strong possibility. Soon after, with the discussion on that topic completed, the president left the room. Everyone else stayed.

Sununu and Robert Mosbacher took over the remainder of the meeting. They shifted the conversation to a new subject: bank lending and credit availability. They were hearing numerous complaints from small business owners who said they could no longer find bankers who would lend to them.

As more and more commercial banks ran into financial difficulty, they had less and less money available to lend. This was affecting small businesses across the country. These companies were dependent on bank loans to stay in business. The reduction in credit availability was making an economic recovery that much more difficult.

The bankers blamed their regulators for being too harsh, making it difficult to lend. Sununu and Mosbacher wanted to know what Brady, Greenspan, and the rest of us were going to do about that since the bank examiners worked for our agencies. Sununu and Mosbacher pointed out that increasing bank lending and credit availability was important if economic conditions were to improve.

The financial regulators in the room understood the relationship between bank lending and economic performance, but there was another side to the story. Brady and Greenspan took the lead in reminding Sununu and Mosbacher of the risks to the economy if bank regulators weakened their supervisory standards. They explained that credit should only be extended to creditworthy borrowers. To do otherwise, they said, would lead to more bad loans, more bank failures, and a weaker economy.

This was not what Sununu and Mosbacher wanted to hear. The meeting grew more and more contentious, with accusations flying back and forth across the table. Sununu eventually adjourned the meeting, perhaps realizing that no progress was being made. Looking around the room at the surprised faces, given the confrontational tone the meeting had quickly taken, Sununu announced that the discussion would continue at a later date with a smaller group. I had the clear impression that he wanted a more private meeting with Brady and Greenspan. Credit availability—also known as the “credit crunch”—was becoming a major political issue.

As I walked out of the meeting room in the West Wing of the White House and headed toward the exit, I was thinking about what had just occurred rather than the more immediate task of finding my way out of the building. Somewhere along the way I took a wrong turn. Almost immediately I found myself surrounded by Secret Service agents who decided to personally escort me the remainder of the way out.

A few months later, in July 1991, I substituted for a now-healthy Bill Seidman at another meeting on bank lending. Representative Charles Schumer (D-NY) organized this meeting, and it involved approximately 20 of his small business owner constituents, who were finding it more difficult to obtain bank loans. They wanted the bank regulators to hear their concerns. Schumer had held an initial session that morning for these business owners with Alan Greenspan, and the meeting with me followed. Senator Al D'Amato of New York arrived as the meeting began.

Schumer opened the meeting by attempting to set some ground rules. In particular, he wanted to make it clear that the purpose of the meeting was not to beat up on the bank regulators, but rather to allow them to hear firsthand the difficulties that small business owners were experiencing in trying to obtain new loans. About one minute into the meeting, Senator D'Amato interrupted Schumer to announce that in fact he was there to beat up on the regulators and that he still intended to do just that. Quickly glancing around the room, I confirmed what I already knew: I was the only bank regulator there.

Schumer told Senator D'Amato that he was not going to let this meeting get away from its original purpose, which I certainly appreciated. After some back and forth between the two elected officials, Schumer won his point, and the meeting continued in an orderly manner.

The tension in meetings like these was understandable, given that small businesses were struggling, and many were going out of business. They were handicapped by the difficulty of obtaining bank loans.

Banks were in much weaker financial condition than in the past, when credit was easily accessible. They could not afford to lend quite so freely. Instead, they needed to rebuild their capital levels to cover the losses incurred by loans that were defaulting. They also needed to tighten their lending standards in order to remain in business.

Prospective borrowers also were in much weaker financial condition. Many of them could no longer afford to pay off their loans, which meant that if they could obtain new credit, it would be on terms less favorable than in the past. For many, bankruptcy was a real risk.

Bank examiners were stuck in the middle. Their job is to ensure that banks maintain appropriate lending standards. They know that if standards are too lenient, there will be too much lending, which will eventually lead both borrowers and lenders into financial difficulties. They also know that if those standards are too restrictive, there will be too little lending, which will slow down job creation and overall economic growth.

Bank supervision is not an exact science. Neither is “underwriting” or approving a loan. Since many factors determine the creditworthiness of individual borrowers and the appropriate terms under which loans should be made, there is often a difference of opinion about whether to approve or reject a loan application. Thus, bank examiners and bankers are easy targets for criticism. Such criticism is most pronounced during a period like the early 1990s, when the economy was weak and overall bank lending was shrinking.

Indeed, at this time, bank examiners were under enormous pressure. They were criticized for being arbitrary, inconsistent, and overly harsh. The Wall Street Journal ran articles labeled “The Regulators from Hell,” identifying certain individuals by name. Considerable anecdotal evidence was presented suggesting that bank examiners were overreacting to the situation and to commercial real estate problems in particular.

Amid this pressure, the tension between Seidman and various other Bush administration officials continued. Seidman had developed close working relationships with the media and with key members of Congress. He didn't hesitate to use these relationships to his advantage and often outmaneuvered the Treasury Department on key issues.

Seidman was willing to speak out because the FDIC is an independent federal agency. It reports directly to the Congress rather than to the Treasury Department or any other part of the executive branch. And while the chairman of the FDIC and the other four members of its board of directors are appointed by the president and confirmed by the Senate, virtually all of the FDIC's staff are “career” government employees rather than short-term political appointees. In addition, the FDIC is funded by the banking industry rather than through congressional appropriations. The banking industry pays insurance premiums to the FDIC for the coverage it receives on bank deposits. This independent source of funding from the banking industry rather than from taxpayers also helps to give the agency greater independence from the political process.

The FDIC needed to be independent to insulate it from political pressures that could potentially compromise the integrity of bank supervision and regulation.

Since the FDIC was a small agency, it had grown accustomed to having a lesser voice in financial market policy debates. That changed in the 1980s as the financial crisis emerged and the FDIC's prominence grew. Like a little sibling that grows up and suddenly realizes that he or she can be more assertive, the FDIC was more than willing to exert its newly found influence.

Exerting independence too strenuously can have political ramifications. In this case, John Sununu told Seidman that he should resign. Bill refused. He said that he would leave only if the president asked him to. President Bush never did, though his spokesman, Marlin Fitzwater, said in May 1991, “we are interested in getting new leadership” at the RTC, which was interpreted in the media as the White House urging Seidman to quit. But he remained as FDIC chairman until the end of his six-year term in October 1991. Sununu left the White House that same year. Later, in a conversation with Seidman, someone described John Sununu as his own worst enemy. Bill's response was: “Not while I'm alive.”

As Seidman was preparing to depart the FDIC, he commented that he wasn't going to leave anything behind in his office. Hoyle Robinson, the FDIC's executive secretary, joked that that seemed appropriate since he wasn't leaving anything behind in the bank insurance fund either.

Seidman wasn't amused, and the reality was that he did a masterful job of preserving the bank insurance fund. The problem was that the large number of bank failures was steadily draining the fund of its resources. Various academics were estimating the cost to the FDIC if the loans held by the weaker banks were “marked-to market.” That means they estimated the cost of these loans if they were sold at then-current market prices, the resulting insolvent institutions were closed, and the FDIC picked up its share of the cost. Their estimates were $80 billion higher than the amount that was in the bank insurance fund.

At the FDIC, we had no expectation of bank closings and losses of that magnitude, since these banks were not about to sell all of their loans on the open market and these loans would be worth far more if the banks kept them. Nevertheless, the studies highlighted that the bank insurance fund needed to be recapitalized.

As Sununu promised, high-level discussions on bank lending followed the contentious meeting at the White House in November 1990. To help ensure that bank examiners were consistent in the standards they used to judge the quality of bank loans, the four bank regulatory agencies issued a joint policy statement on the review and classification of commercial real estate loans in November of 1991. The guidance sought to clarify existing policy so there could be consistency in examiner behavior.

In order to better ensure that all the bank examiners were interpreting the guidance the same way, the four bank regulatory agencies sponsored a conference for bank and thrift examiners in December 1991. The conference was an opportunity to review with senior bank examiners the policy statement and other issues related to credit availability.

The senior bank examiners at the four bank regulatory agencies were apprehensive about the conference. They believed the administration wanted to force them to weaken their supervisory standards well beyond what was appropriate. The conference opening reinforced this impression, as administration officials spoke about the impact of regulatory and supervisory actions on credit availability. While the comments were not unreasonable, the very presence of these officials concerned the bank examiners. They were accustomed to exerting their independent judgment without any political interference. This conference was bringing them too close to the political arena for their comfort.

In fact, one senior supervisory official (not surprisingly from the FDIC) stood up before the entire group and told the on-stage speaker, Treasury Secretary Nicholas Brady, that he had no authority or right to tell bank examiners how to do their jobs. While not everyone in the room agreed with the public rebuke of a senior administration official, most believed in the underlying message. What that FDIC official did not know was what I had personally witnessed, that Secretary Brady strongly defended the agencies' bank examiners before John Sununu and others who wanted him to be much more aggressive in curbing their independence.

Administration officials believed that while the bank examination process should be independent of political influence, elected officials and political appointees could still provide useful information that should be factored into the decision-making process.

It was a fine line to walk, and the conference was one of the first challenges for the FDIC's new chairman, Bill Taylor. No one had greater credibility with bank examiners. A career bank examiner, he had risen through the ranks at the Federal Reserve to become the director of Bank Supervision. He had earned tremendous respect as a straight shooter who would not bow to political pressure. Bill decided to support holding the conference and worked to ensure it would be constructive.

At that time, my title was deputy to the chairman. That meant Bill Taylor inherited me as his deputy. I wondered what that meant for my own career. But in my first meeting with Bill after he became chairman, he told me he wanted me to remain in the job as his deputy and that I had his full support. I was as shocked as I was pleased. Government employees are used to having to re-earn the trust of the senior political appointees with each change in leadership. Bill grew up as a government employee and understood that. There was a lot to do and he did not want to waste time. I quickly learned that Bill was very demanding, but a supportive leader. As I worked closely with Bill over the following months, I developed tremendous respect for him.

Unfortunately, Bill Taylor's time as chairman of the FDIC proved to be far too short. In August 1992, Bill went into the hospital for cancer-related surgery. The operation was a success, and a few of us went to the hospital while Bill was recuperating to watch him administer the oath of office to C. C. Hope Jr. for a second term as an FDIC board member. But while still in the hospital, Bill had a heart attack and died. He was only 53 years old.

At the FDIC we were devastated by the news. In the 10 months Bill had been chairman, we had seen enough of him to know that he was a tremendous leader and an even better person. Bill had a great sense of decency and fairness and the courage to take the right course of action, regardless of the consequences to him personally.

The FDIC's vice chairman, Andrew “Skip” Hove, became acting chairman and performed admirably. But knowing how much Skip respected and admired Bill, I can only imagine how much he wished that the circumstances had been different.

In March 1993, the FDIC suffered a second devastating blow when C. C. Hope Jr. passed away. Within a few months there was almost a complete change in the membership of the FDIC's board of directors. In December 1992, Jonathan Fiechter, an experienced and respected bank regulator, had joined the FDIC's board when he was named director of the OTS. He replaced Tim Ryan, who had led the agency through the S&L crisis. In April 1993, Gene Ludwig, a highly regarded partner at Covington & Burling, joined the board after he was appointed by President Clinton and confirmed by the Senate as the 27th Comptroller of the Currency. Ludwig and Fiechter remained on the board for a number of years and would help guide the FDIC through a difficult period of transition following the S&L crisis.

Throughout this period the bank insurance fund continued to shrink. Recapitalization would not be easy. There were statutory limits on how much money the FDIC was allowed to raise from the banking industry. In 1990, banks were paying 12 cents a year in deposit insurance premiums for every $100 they had in customer deposits. (This amount is referred to as 12 basis points.) The FDIC was permitted to raise those premiums by only 7.5 basis points a year. The FDIC did raise premiums the full amount, to 19.5 basis points, but we still were concerned whether that would be sufficient.

The FDIC asked Congress to change the law to remove the cap on annual premium increases and to remove the overall cap of 32.5 basis points on what banks could be charged. In September 1990, I testified before the Senate Committee on Banking, Housing, and Urban Affairs on the FDIC's behalf in support of that legislative proposal.

My testimony included a request that Congress give the FDIC greater discretion over whether the industry should receive refunds on portions of their deposit insurance premium payments. Refunds were automatic if the ratio of the bank insurance fund to insured deposits exceeded 1.25 percent. Between 1950 and 1983, annual deposit insurance premiums were 8.33 basis points, but the FDIC was required by law to refund half of that amount. If the FDIC had been able to keep that money there would have been an additional $32 billion in the fund.

The point is not an insignificant one. The banking industry was profitable from 1950 to 1983. Paying the full 8.33 basis points a year would not have been that difficult. But in 1990 and 1991, the banking industry was not profitable. Paying 19.5 basis points was a burden for the banks, undermining their ability to make new loans and depressing economic growth in the process.

If the FDIC had the authority to replenish the deposit insurance fund during good times, everyone would have benefited. The banking industry would have been able to pay a higher proportion of their insurance premiums when they could most afford it. Other businesses and consumers would not have seen their ability to borrow money contract as severely during the downturn. Economic booms and busts would be a bit less dramatic, creating a somewhat more stable and predictable economic environment. Everyone would win, but enacting such a measure depended on a long-term outlook often absent from the political process.

It often takes a crisis situation before Congress will enact longer-term reform measures. There was a crisis in 1991, and Congress did remove the constraints on the FDIC's ability to raise premiums. But the problems associated with refunds and the 1.25 percent ratio went unaddressed. This would become a problem again during the 2008 financial crisis.

But in 1992, as the economy began to recover and the number of bank failures declined, the financial position of the bank insurance fund quickly began to improve. By year-end 1995 there was $25 billion in the fund and the ratio of the fund to insured deposits once again exceeded the 1.25 percent target.

A provision in the law stated that if the ratio of the bank insurance fund to insured deposits exceeded 1.25 percent then well-capitalized and well-managed banks did not have to pay any premiums. As economic conditions and bank profits improved most banks were viewed to be well capitalized and well managed.

By 1997, 19 out of every 20 banks were not paying any deposit insurance premiums. During the mid to late 1990s and early 2000s deposit insurance premiums remained negligible for most banks. During those same years the banking industry had record levels of profits.

The FDIC was concerned about its limited ability to manage the size of the fund. The banking industry had other ideas, believing that zero premiums were appropriate because it had “prepaid” their premiums during the crisis period. The FDIC was able to maintain the fund at the 1.25 percent ratio simply by investing the money it already had in government securities.

By 1999, the FDIC asked Congress to change the law and allow it to charge all banks some amount of premiums even when the fund exceeded the 1.25 percent ratio. The idea was to smooth out the flow of deposit insurance premiums over time so that the banking industry would not have high premiums when it could least afford them, and little or no premiums when it could most afford them.

There was little support in the banking industry for such a change, particularly given that more than 95 percent of the banks were paying no deposit insurance. With the economy strong, the banking industry had far more political clout than bank regulators, so nothing happened.

Without a crisis to shift the political winds the FDIC's deposit insurance reform legislation lingered in Congress for six years. Only in 2005 when it became clear that the ratio of the fund to insured deposits was going to drop below 1.25 percent did sufficient support materialize to change the law. By then, it was clear that zero premiums were unlikely to persist. The prospect of more gradual premium increases that were permitted under the proposed new law was more attractive to bankers than the dramatic increase that could result under the existing law. The banking industry now saw deposit insurance reform as being in their best interests. As a result, Congress passed the legislation in December 2005. President George Bush signed the bill into law in February of 2006.

While the Deposit Insurance Reform Act of 2006 was an improvement, it was a political compromise that still had shortcomings. Chief among the shortcomings was that there was a cap on how much the fund could accumulate. This amount was less than what would be necessary to withstand a financial crisis.

The costs associated with the 2008 financial crisis rendered the deposit insurance fund insolvent for a second time. Once again, the banking industry faced substantial increases in premiums when it could least afford them. And once again the lack of credit availability became a major political issue. President Obama, members of his administration, members of Congress, and some senior bank regulators put pressure on bankers to increase their lending to help pull the economy out of the recession. Yet these same bankers were also being told to raise their lending standards, increase their capital levels, improve their liquidity, and pay higher deposit insurance premiums.

The pressure eventually shifted from the bankers to their examiners. Various oversight groups, including the bank regulatory agencies' inspectors general, criticized bank examiners for not being aggressive enough prior to the crisis. At the same time, business owners, bankers, and their elected officials complained that bank examiners were now being too aggressive.

Congress held a number of hearings to look into the matter. These hearings followed a familiar pattern. The first panel would include representatives from small-town banks or businesses, who would complain that bank regulators were overreacting to the situation. Their testimony would be well received. The second panel would include representatives from the bank regulatory agencies, who would describe how they were taking a reasonable approach to ensure they were being neither too easy nor too tough. Various members of Congress would then attack their testimony.

In July 2011, George French represented the FDIC at one such hearing. George joined the FDIC in 1986 as an economist in the Research Division, and by the time of the hearing, he had become the head of bank supervisory policy. When it came time for George to speak, he explained how the FDIC strives for a balanced approach to supervision. As expected during the question-and-answer period afterward, his testimony was widely criticized by various congressmen. He was accused of being arrogant and deceitful.

What wasn't expected was that immediately after the hearing, while still in the hearing room, a first-term congressman from New Mexico, Steven Pearce, charged over to George to continue his verbal assault. The congressman stood about one foot away, violently waving his finger in George's face, and yelling that he was going to make George publicly recant his testimony. A crowd of people watched in amazement. The FDIC staff in attendance, who had witnessed much in their years of covering Congress, was taken aback at the viciousness of the tirade. Later, Representative Spencer Bachus, a Republican from Alabama, and the chairman of the Financial Services Committee, called George to apologize on behalf of the Committee. Congressman Bachus could not have been more gracious. The political theater that necessitated such a call was not only rude and uncalled for; it was extremely shortsighted.

History does repeat itself. Consumer and business debt levels grow during economic expansions and contract during recessions. Bank lending standards and bank supervisory standards weaken during these expansions and tighten during the subsequent contractions. When these swings become too pronounced, the economy is subject to booms and busts. This happened during both financial crises.

With a more balanced approach to lending throughout the business cycle, the economy won't grow quite as fast during the “boom” part of the cycle. However, the downturn won't be as deep and the economy will recover faster. For this to happen, policymakers need to take a longer-term point of view. That isn't easy. No one wants to slow down a booming economy.

Bankers and bank examiners who try to maintain a balanced and reasonable approach toward lending standards throughout the business cycle often find themselves under pressure to back off. As difficult as the concept may sound, the banking industry needs to better support the efforts of bank regulators in what should be a joint effort. Otherwise, prudent bankers will continue to lose business to their less disciplined competitors. The general public and America's political leaders need to better understand this as well. If not, an avalanche of public opinion eventually contributes to an erosion of lending standards that create these boom-to-bust cycles.

History also repeated itself with respect to the FDIC's deposit insurance fund. Twice, the fund did not have enough money to withstand a financial crisis. Twice, bankers had to rebuild the fund when they could least afford to do so.

After the 2008 financial crisis, Congress removed the controls over the FDIC's funding flexibility. As a result, higher premiums can be charged during the good times in order to avoid large premium increases during the bad times. Bankers will have greater stability in their premium payments. Consumers and businesses will have one less factor contributing to credit booms and busts. Everyone should benefit. Hopefully, over time, when crisis memories fade, policymakers won't dilute the FDIC's new authority to maintain a strong deposit insurance fund throughout the business cycle.

Maintaining consistent and reasonable lending standards throughout the business cycle appears to be a more difficult issue to address. Before both financial crises, there was little support anywhere for bank examiners to reign in steadily weakening lending standards. After both financial crises, there was a great deal of criticism of bankers and bank examiners that lending standards were too stringent. There seem to be relatively few interest groups that appreciate the fact that much more balance is needed in lending standards throughout the business cycle.