The Federal Reserve released its quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices on May 5th. Noted was, as expected, historically soft demand and further tightening of lending standards. The number of domestic banks reporting tighter lending standards was near or above historical highs for nearly all loan categories. Home equity lines of credit received the highest level of scrutiny.

Approximately 55% of the banks reported tightened C&I lending standards vs. 30% in January. Increased spreads and premiums have been added to loan products. Eighty per cent of domestic banks reported tightening of lending standards on CRE over the past three months, the highest level since 1990. Thirty-eight per cent of domestic banks reported weaker demand for CRE loans over the same period.

Home mortgages are being written with a higher level of "stips". Actually, more mortgages are being written now than three months ago, so it is quite possible that the bottom of consumer home purchases has been reached. Interestingly, the single family rental residence market is flooded in many areas of the country by those owners who either cannot sell or are expecting too high a price for their residence, preferring to rent out the premises waiting for a market turn.

Multi-family housing has become a very lucrative place for banks to place loan bets as the pool of renters has risen exponentially. Many that would have qualified for financing before the era of "liar loans and free money" came to a grinding halt must now rent.

Out of the bowels of the report, which has only been touched upon here, the speculator may want to take a look at the following bank stocks for possible portfolio inclusion. I believe that the investor searching for more obscure, yet transparent banks will stand to profit handsomely from the effort. Here are a few examples:

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Thomas Smicklas

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