Main Street Seeing Worst Credit Crunch Ever

Away from the too-pig-to-fail bailouts and subsidized sectors of the economy, the credit crunch is getting worse, not better.

Year-on-year percentage growth in Commercial and Industrial loans, the main source of financing for small business, is at negative 10 percent, the worst during the sixty years in which records have been kept.

For the large weekly reporting banks, the beneficiaries of federal assistance, the numbers are much worse:

Given that large banks’ customers often have access to the credit markets, some of this doubtless reflects the substitution of corporate bonds for bank loans.

Holdings of government securities, by contrast, are growing at a 20% annual rate, as the Fed provides cheap reserves to the banking system and banks buy Treasury debt, indirectly monetizing more debt.

Are we clear? The Obama administration has run the federal deficit up to 12% of GDP, handing out money to favored projects. The banks shift their balance sheet away from risky small business to riskless Treasuries. And the grassroots economy gets crushed.

It’s all going to get worse. The personal savings rate is back up from 0% to around 3%, but it needs to go back to 10% and stay there indefinitely, which means that consumer spending has to drop by 7% or more, more or less permanently.

Comments

[Dave Wrixon:]

So the government debt that the Fed is not buying directly is being bought by proxy through the retail banks, using money the Fed has loaned it? Thereby preventing lending to Moms and Paps?

It is clear that the only way to get money to Wall Street is cut Obama's hands off so he cannot sign any more checks.

Oct 29 06:12 AM

[Leftfield:]

A healthy Main St. once supported our government. So well that it got lazy and neglected to protect itself against predation in the name of various programs that were sold in the name of improving society.
The Great Society of Lyndon Johnson has cost $trillions and countless more in collateral damage while actually arresting the long-term decline in poverty a health Main St. had accomplished with good jobs. Big government everywhere has done an appalling job at a ludicrous cost in nearly everything, and has mucked up Main St. through unending interference as well.
The parasite is about to kill the host. It is putting it's unparalleled deficits on Main St.'s tab while it's policies promise to actually cripple the private economy further. That this cannot be America, "land of the free" should be obvious to anyone with a conscience and mind, seeing the direction we're headed.

Oct 29 07:31 AM

[User 353732:]

A Govt of the Thieves by the Corrupt for the Predators: A more perfect union of Big Govt, Big Money and Big Media.
This is the model of the few take much; the many get little that works very well indeed in the 3 tyrannies most favored by the current US Regime: Russia, Iran and Venezuela.

Oct 29 07:52 AM

[john s. gordon:]

too pig to fail - i like that,

time for the independent loan brokerage industry to get going again - we had one in 1988-89 when credit-worthy borrowers were denied loans by the banks. independent brokers brought people with cash together with (small business) people who needed cash & disintermediated the banks. went on for awhile until the banks got over their snit.
> jack

Oct 29 09:32 AM

[TeresaE:]

Meanwhile, the banks - if lending at all - are jacking up rates & fees at the same exact time that assets are being shoved off cliffs.

Beautiful. Just farkin' beautiful.

Sadly my company, and hundreds of thousands just like it, are too small to bother with.

We are the "too few" jobs that every cost coming out of WDC is crushing. We are the "too few" jobs that every increase in lending interest rates erases.

We are the jobs that will be shoving the cost of health care onto the backs of the employees.

We are the jobs that used to grease the wheels that made the banks & auto companies "too pig to fail."

We are the jobs that contributed half of the social security taxes.

And we are dying.

Recovery is here and the recession is over.

If you make your living via unions, WDC or Wall St.

Not much left for the rest of us anymore. Classic symptom of a collapsing economy.

And nobody, barring Ron Paul, in WDC notices, nor cares.

Oct 29 02:35 PM