The question we should be asking is, is our medias learning?
Today brought a whole new perspective from the front lines of lending. At my weekly business networking meeting, I talked to a friend who is in the mortgage business. “Is it true that no one is lending money?” I asked. “I keep hearing that main street is in danger of not being able to get loans for a car or house with this crisis.”
My friend completely debunked that. For one thing, he did just fine (had one of his best months even) in September (of course, he carefully builds his business via a sustainable methodology, which has a lot to do with his growth while other lending outfits contract). For another, he says, it’s no harder to get a loan this week than any other week. The big problem is that lenders, including FHA, have been and are being super-tight with their lending requirements…unreasonable even. But if you have decent credit and some up-front resources, you can still get a loan. He says the media is just overhyper and trying to scare everyone (I think it has more to do with the fact that OMG CRISIS sells ads, and there’s nothing the media likes more than a juicy exciting story, it titillates them) but that the credit crisis is not hitting his business. There are mortgage outfits who have gone under and he’s had to adjust what he can offer his clients, but the money is there to lend.
So is this crisis really a crisis, or hyped and manufactured by Paulson/Bush/media for one reason or another? One guy on the ground selling loans says, no way, it’s overblown.
Now how that relates to the big corporations who do all the short-term borrowing and if they are frozen in time without capital, I’m not sure, but this ain’t hitting Main Street yet, at least according to my friend.
Hop over to this diary and read the article mentioned in the first comment by David.
Its the car dealer floor plan loan.
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p>I would be far more reassured if your friend were in the business lending, rather than consumer lending business.
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p>It is one thing if consumers have a harder time buying cars because lenders want better credit scores. It is another if consumers cant buy the car
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p>because they are out of a job
because their employer ceased operations
because their main supplier couldn’t meet payroll
because the supplier didn’t have cash on hand to meet payroll
because business lending stopped.
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p>They’re trying to stop that row of dominoes from falling, and the first one is teetering. You are focused on the last domino in the row, and saying “Looks solid to me.” It would take awhile for all of those dominoes to fall.
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p>It would be nice if there were a nice index– a Dow Jones Industrial Average– to give a snapshot business lending. This index would give a better picture of what is going on. Alas, I don’t think there is any such handy stat.
What kind of business modesl are out there that require the use of credit to make payroll?
I understand the “new math” that has become the norm sice Reagan first claimed that deficits do not matter but doesnt it seem that the focus of correcting the problem is to invite business to operate in a responsible manner and not immedietly use very light bulb and wall socket cover as colateral to fund personal perks and then require unsecured credit instruments to make payroll?
Lol .. remember when they actualy kept inventory and had plants and equipment?
Where do they teach these bubbleheads how to operate. they should be out of business.
Because for the businesses, there is no such thing as a “steady paycheck.” They get some money in this week, a lot next week, then none for two weeks, etc.
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p>Yet the business has steady expenses. The rent is due when it is due, as are the utility bills, and payroll is on payday.
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p>They can cover these bumps by having a big cushion of cash to draw on, and replenish, but this is a rather inefficient use of capital. Or they can cover these bumps through the use of credit, which is more efficient.
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p>The widespread use of credit is indeed a modern phenomenon, and has contributed greatly to economic growth. If your position is that the use of credit should cease, then you are advocating a rather dramatic contraction of the economy.
But the Fed published this in July.
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p>It will be interesting to see how things look in the next (Oct/Nov) report.
Is that straightforward lending is working fine. All the paperwork tricks such as “business paper” — AT&T short-term currency — aren’t working as well.
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p>In other words, after the market was brought low by sophisticated yet dangerous accounting tricks, the market is no longer going for sophisticated yet dangerous accounting tricks.
The commercial paper market is fine too. The
30 day and 60 day rates barely budged in September. Except for financials. They can’t borrow money from anyone right now. Except for the government.
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p>All of the easy to look at indicators suggest that there is no crisis. There is concern that a crisis might be coming. And there are anecdotal claims of problems. But nothing that can be easily verified.
The Federal Reserve keeps track of most lending in this country. The data is available, although it doesn’t come with much of an explanation as to what you can get.
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p>I just looked at the commercial paper data for September. There was a problem around Sep 17 (related to Lehman brothers going bankrupt and the Reserve Primary fund dropping below $1), another one around Sep 22, and another one yesterday. There hasn’t been a general trend towards bigger problems, just a few spikes that seem to be handled quickly. Even the lower rated paper is being bought.