Worried Banks Sharply Reduce Business Loans

[marmar]

NYT, via Yahoo!:



Worried Banks Sharply Reduce Business Loans
by Peter S. Goodman
Tuesday, July 29, 2008
provided by The New York Times


Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring.

Two vital forms of credit used by companies — commercial and industrial loans from banks, and short-term “commercial paper” not backed by collateral — collectively dropped almost 3 percent over the last year, to $3.27 trillion from $3.36 trillion, according to Federal Reserve data. That is the largest annual decline since the credit tightening that began with the last recession, in 2001.

The scarcity of credit has intensified the strains on the economy by withholding capital from many companies, just as joblessness grows and consumers pull back from spending in the face of high gas prices, plummeting home values and mounting debt.

“The second half of the year is shot,” said Michael T. Darda, chief economist at the trading firm MKM Partners in Greenwich, Conn., who was until recently optimistic that the economy would continue expanding. “Access to capital and credit is essential to growth. If that access is restrained or blocked, the economic system takes a hit.”

Companies that rely on credit are now delaying and canceling expansion plans as they struggle to secure finance. ......(more)

The complete piece is at: http://finance.yahoo.com/loans/article/105461/Worried-Banks-Sharply-Reduce-Business-Loans

[TexasObserver]

1. As Ned Beatty's character said in Network ...

..."I don't think I'm gonna wanna see you fellers for a while."



Oh, wait. It was the thing about capital having a life of its own. Yeah, that's the ticket.

[SoCalDem]

2. As painful as it might be, it's TIME that capitalism actually started

to work the way they have always TOLD us it was supposed to work..

Viable companies survive, and profligate ones fail..

There are TOO many banks with too many huge glass buildings.

I know it's not going to be pleasant to live through, but we have ALL been living well-beyond our means for DECADES, and it's now time to take our medicine.. It's some nasty tasting medicine, but it's better to take the whole dose in a hurry, than to take it a drop at a time..

There are MILLIONS of people in this country who ARE going to be unable to keep up the payments on all the plastic shit from China™©, and as they start to default, en masse, we will see the true color of our desperation as a nation.

It HAS to happen, folks...we cannot stop this runaway train.

[KharmaTrain]

3. It's Been Death Valley For A Year

Small businesses were the first hit with tough new loan restrictions or turned down altogether when the credit crunch began. They were also some of the first loans called when the banks needed to raise capital fast. It's all but shut down a lot of small companies unless they privately fund or go to "angel investors" (a polite name for professional loan sharks). I've never seen such a stagnant business atmosphere as I do now. Everyone is holding on for dear life and trying to keep the red ink to a minimum. Usually I would hear of one contact or another with a plan going on...now I hear nothing...except when another one goes under due to declining sales and escalating costs.