That Credit "Crunch"

[alexamenos]

I beginning to think that credit crunch is not so much a dire economic crisis as it is a return to some prudency in lending and borrowing. Yes indeedy, there is a vast slowdown in the in the credit markets - folks loaded down with debt and with no reliable sources of income are finding it quite difficult to finance $500k McMansions with zero down, zero principal loans, etc....hence the beast that has fed the housing bubble for the last few years is dying an ugly death.. Arguably, this is a good thing. But potential borrowers with good credit ratings and lenders with a grain of business sense are still active....this is no great surprise.

Anyway, a couple of recent articles standout....one was from the DMN today on the slow down in car sales in the area which repeatedly cited the "credit crunch" as a cause for the slowdown. But the article went on to explain that in many cases the "crunch" was because financiers were insisting on downpayments, they were not willing to roll negative equity from a trade-in into the new loan, and presumably they were insisting the buyers have income. IOW, the "credit crunch" in that article quite explicitly referred to lenders unwillingness to make bad loans, not an unwillingness nor inability to make good loans.

and then there's this article.....

Credit crunch? What credit crunch?

PARIS (Reuters) - The credit crunch is not nearly as severe as the U.S. authorities appear to believe and public data actually suggest world credit markets are functioning remarkably well, a report released on Thursday says.

As a result, governments are pumping masses of public money into the economy across the world because of the difficulties of a few big, vocal banks and industries such as car manufacturing, which would be in difficulty anyway, according to the report published by Celent, a financial services consultancy.....

The report, much of which is based on U.S. Federal Reserve data, challenges a long list of assumptions one by one, arguing that there is indeed a financial crisis but that, on aggregate, the problems of a few are by no means those of the many when it comes to obtaining credit.

"It is startling that many of (Federal Reserve) Chairman (Ben) Bernanke and (Treasury) Secretary (Henry) Paulson's remarks are not supported or are flatly contradicted by the data provided by the very organizations they lead," said the report.