Banks continue to tighten loans, slowing recovery

As banks maintain a tight rein on loan standards and consumers hold back on taking new debt, the economic recovery looks like it will be a slow one. Economists don't have a clear picture of what's next for the economy. Some believe that the downturn has been so severe, we'll see a strong recovery. Others think that, as businesses and consumers pay down debt or hold back on purchases, the recovery will be weak. Another group of economists say that there will be a quick, short rebound, followed by another recession.

The government decided to try to push the odds for at least a weak, longer-term recovery by extending the Term Asset-Backed Securities Lending Facility (TALF) through March 31, 2010. Under this program, the Fed makes low-interest loans to investors and offers them loss protection so they can then buy securities backed by consumer and business loans. It was supposed to end in December.