CREDIT: Lighten Up, Lenders

Lighten Up, Lenders

Banking regulators often lecture on the need for caution. But last week lenders heard quite a different message: Loosen up. The advice came straight from the top U.S. regulators, including Alan Greenspan, chairman of the Federal Reserve Board, who trooped over to a Washington meeting of a banking- industry group to warn lenders against being overly cautious and too restrictive in their loan policies.

Greenspan aims to ease a trend that began last year, when federal regulators tightened their examination of loans in the wake of massive real estate defaults. In the economically distressed Northeast, this tough oversight has compelled some...

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