"if banks loosen credit?"
you must be a perma-bull !!
Bartholomeusz had a good piece on the banking sector today at BS
You have to register to view the whole article, but i've listed the most important bit.
http://www.businessspectator.com.au/bs.nsf/Article/banks-election-CBA-financial-services-Westpac-ANZ--pd20100817-8E4EM?OpenDocument&src=spb
"CBA and its peers would almost certainly be already losing money on their new mortgage originations on the basis of their marginal rather than average funding costs.
There is a certain amount of lending banks have to do to stay in business and satisfy their customer bases, and mortgages that are unprofitable when written can become profitable with time and cross-selling.
The situation confronting the banks will, however, worsen over time unless they either virtually stop lending or are able to pass through at least some of the higher cost of raising wholesale funding or attracting retail deposits."
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