Many bankers appear to have developed a financially conservative mindset when it comes to lending.
Here's a quote from an Aug. 3 CNBC article:
Banks are tightening lending standards across the board even as they're being urged to get money to those who have been hit by the coronavirus pandemic, according to a Federal Reserve survey [Aug. 3].
From commercial real estate to credit cards and autos, institutions are getting tougher on giving out money compared to the second quarter, even though demand also has decreased across most categories.
The Fed's senior loan officer survey also showed that foreign banks also are showing a reluctance to lend.
"Major net shares of banks that reported reasons for tightening lending standards or terms cited a less favorable or more uncertain economic outlook, worsening of industry-specific problems, and reduced tolerance for risk as important reasons for doing so," the survey stated.
The banks further cited weaker capital positions, less competition and worries over increased regulatory burdens.
At the same time, demand for commercial and industrial loans ebbed. Except for residential real estate, demand fell for all other forms of consumer debt.
Also, note this chart and commentary from the August Elliott Wave Financial Forecast:
More than 40% of U.S. banks tightened lending standards on loans to large and mid-size firms. At the same time, the percentage of banks reporting an increased willingness to make consumer loans fell by 20% (bottom graph). As the grey shaded areas indicate, similar levels prevailed at the outset of the last three recessions.
This is all a part of a developing deflationary psychology.
Robert Prechter's 2020 edition of Conquer the Crash provides insight:
The psychological aspect of deflation and depression cannot be overstated. When the trend of social mood changes from optimism to pessimism, creditors, debtors, investors, producers and consumers all change their primary orientation from expansion to conservation. As creditors become more conservative, they slow their lending. As debtors and potential debtors become more conservative, they borrow less or not at all. As investors become more conservative, they commit less money to debt investments. As producers become more conservative, they reduce expansion plans. As consumers become more conservative, they save more and spend less. These behaviors reduce the "velocity" of money, i.e., the speed with which it circulates to make purchases, thus putting downside pressure on prices. The psychological change reverses the former trend.