Credit Is Now Very Hard To Obtain
Sunday, 20. July 2008, 05:02:10
Credit Crisis Morphs Into Credit Gridlock Where Credit Is Virtually Impossible To Obtain ... Is A Systemic Risk Event Imminent?
Fannie’s demise comes at a particularly difficult time for the banking system. According to a report by Paul Kasriel, Chief Economist at Northern Trust writing in Option Armageddon, Understanding Bernanke relates that the credit crisis has morphed into a credit gridlock where corporations are unable to obtain operating funds as debt comes due resulting in bankruptcy.
“The sharpest 13-week contraction in bank credit” since data were first available in 1973. Banks simply don’t have the capital on hand to avail “themselves of the cheap credit the Fed is offering to fund them at” ... This is what it means to be in a “credit crunch.” Banks have suffered hundreds of billions in losses, forcing them to pull credit out of the economy. Every time you read an article about banks cutting credit lines, exiting lending businesses, or eliminating mortgage products it represents more bank credit drying up.”
Bank credit is drying up because the capital is being destroyed (from foreclosures and downgraded assets) faster than anytime in history. We are just now feeling the first stiff breezes from a Force-5 deflationary hurricane set to touch down in 2009. Fannie and Freddie are teetering towards insolvency while the country is entering the most vicious downward cycle since the Great Depression. Higher interest rates, negative home equity, mounting credit card debt, auto loan debt, commercial real estate debt and tightening lending standards will only curtail consumer spending more putting greater pressure on the dollar.
And Mark Herlihy of Bloomberg writing in Bank Credit Is Harder to Obtain, U.K. Finance Chief Survey Says relates: “More than three quarters of U.K. chief financial officers said credit has become ‘hard to obtain’ as a result of turmoil in financial markets, according to a survey by Deloitte and Touche LLP. The survey found that 77% of CFOs said credit was hard to obtain, compared with 63% in March and 48% in September, Deloitte said ... Some 89% of respondents rated credit as ‘costly,’ compared with 72% in March and 59% last September. Conditions are likely to get ‘worse,’ Deloitte said.”
Fannie’s demise comes at a particularly difficult time for the banking system. According to a report by Paul Kasriel, Chief Economist at Northern Trust writing in Option Armageddon, Understanding Bernanke relates that the credit crisis has morphed into a credit gridlock where corporations are unable to obtain operating funds as debt comes due resulting in bankruptcy.
“The sharpest 13-week contraction in bank credit” since data were first available in 1973. Banks simply don’t have the capital on hand to avail “themselves of the cheap credit the Fed is offering to fund them at” ... This is what it means to be in a “credit crunch.” Banks have suffered hundreds of billions in losses, forcing them to pull credit out of the economy. Every time you read an article about banks cutting credit lines, exiting lending businesses, or eliminating mortgage products it represents more bank credit drying up.”
Bank credit is drying up because the capital is being destroyed (from foreclosures and downgraded assets) faster than anytime in history. We are just now feeling the first stiff breezes from a Force-5 deflationary hurricane set to touch down in 2009. Fannie and Freddie are teetering towards insolvency while the country is entering the most vicious downward cycle since the Great Depression. Higher interest rates, negative home equity, mounting credit card debt, auto loan debt, commercial real estate debt and tightening lending standards will only curtail consumer spending more putting greater pressure on the dollar.
And Mark Herlihy of Bloomberg writing in Bank Credit Is Harder to Obtain, U.K. Finance Chief Survey Says relates: “More than three quarters of U.K. chief financial officers said credit has become ‘hard to obtain’ as a result of turmoil in financial markets, according to a survey by Deloitte and Touche LLP. The survey found that 77% of CFOs said credit was hard to obtain, compared with 63% in March and 48% in September, Deloitte said ... Some 89% of respondents rated credit as ‘costly,’ compared with 72% in March and 59% last September. Conditions are likely to get ‘worse,’ Deloitte said.”
