Re: [Pen-l] "Has Barack Obama's presidency already failed?"

[Jim Devine <jdevine03@xxxxxxxxx>]

Carrol Cox wrote:
> Considering that the recession began over a year ago, rather _before_
> lending [dried] up, how do we know that the problem is refusal to lend
> rather than refusal to borrow -- their not being anything promising to
> spend/invest the borrwoed money on?

It's both. With falling or even negative home equity, prudent people
don't want to borrow, while those who want to have bad credit ratings.
With mortgage-backed securities nearly worthless, the banks' balance
sheets are trashed and they don't want to lend, especially since so
many aren't as creditworthy (in the banks' eyes) as they were a year
and a half ago.

The news reports, however, are all about a shortage of loans (credit
rationing) where people do want to borrow at current rates but banks
refuse to lend, partly by raising credit standards. So the supply side
of the loan market (i.e., banks & other lenders) seems to be the
bigger problem.

-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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