Tuesday, October 21, 2008

Wanted: Credit Crunch Anecdotes

I have given some multi-billion dollar examples of how businesses continue to fund new projects despite the so-called credit crunch. There are remarkably few counter-examples.

I have a friend who has some lake property, against which he took out a callable loan and has faithfully made the payments. The loan was just called. I'm not sure this is a counter-example (is there a good project he can't fund because of the loan call?), but I mention it because it's one of the only anecdotes I have that might suggest that the bank crisis is even trickling out to the wider economy.

CNNMoney.com has a story of 12 small businesses during the credit crunch. I was really eager to read this one, anticipating that I'd learn about real-live small businesses that are unable to fund good projects because of this month's banking crisis. Well, I was disappointed. Of those 12 businesses, many reported that their troubles began a year ago. Others report that they are doing great, and are just worried that, someday, a credit denial will get in the way of their continued success. One business owner had been continually denied credit for the last four years -- so this month was nothing special! Only the boogie board shop owner provided a possible counter-example: he said that his sales would be $2 million/year rather than $1 million/year if his credit line had not been frozen.

If all I can find to counterweight my multi-billion dollar examples is a boogie-board entrepreneur and one called lake property loan, I'm going to have to conclude that the credit crunch is not significantly impacting the real economy. Given that the news media hungers so intensely for such examples yet still cannot produce them, what else can we conclude?

Do you have any examples?


Angela said...

NPR ran this story a month ago. http://www.npr.org/templates/story/story.php?storyId=95187295

Frank said...

Example 1
Banks collapsing home equity lines of credit no matter what the loan-to-value.

Example 2
Banks requiring 20%+ down no matter what the scenarion, including home improvements that would immediately increase the market value of the home

Bartman said...

In India our bank is only extending loans that are able to demand more than 19% interest. They annulled all prior arrangements with lower interest. Their argument was that they were facing liquidity problems following the credit crisis. And who are we to pose against helping our lovely bank in times of need. I guess we'll be taking the loan at their terms