I find it hard to believe, that any bank, let alone a small bank hasn’t loosened its standards to compete. After all the last few years, if you didn’t loosen standards your business dried up completely. Customers don’t normally care how solvent the bank is when the borrow money, only when they deposit.
The race for growth was the race to the bottom, but even those that were aware of what was happening had to have participated, those bank employees have to be paid somehow.
All of which brings me to my actual point. A sh*tty asset crisis my not affect all banks equally; Dave yours may be relatively prosperous. All RE based assets are going to take a hit in terms of valuations. The good as well as the bad. This means that all banks are going to want to lend less money, hence credit contraction. Ultimately that is what the FED is fighting against.
When banks start failing people are going to be a lot less willing to lend them money which only tightens the noose. The good banks and the bad banks get hit with the same macro-economic mackerel, or so it would seem.
