Left In Lowell

Is Lending Really That Tight?

12 Responses to “Is Lending Really That Tight?”

1. Tim Little Says:
   October 1st, 2008 at 12:59 pm

   I’m not in a position to judge any individual’s particular experience, but I’m wary of drawing conclusions based on small sample sizes. What strikes me as more worrisome is this:

   http://www.wickedlocal.com/amesbury/news/x345114752/In-wake-of-market-plunge-state-access-to-capital-markets-frozen

   If the state lacks the ability to borrow money to pay its bills, it will have a very negative effect on all of us.

2. Tim Little Says:
   October 1st, 2008 at 1:29 pm

   Very comprehensive post over at BMG, btw:

   http://www.bluemassgroup.com/showDiary.do;jsessionid=563C468ECFE6D26DE3E790B81D3FA0C1?diaryId=13299

   The main point is that we want to AVOID the crisis hitting Main Street.

3. Lynne Says:
   October 1st, 2008 at 1:37 pm

   What I want to know is, how the heck did it become common practice to run your biz without a small cushion to shore up those day to day operating costs when needed, like it used to be?? If the city of Lowell runs itself without free cash on hand everyone screams bloody murder (and they should). Instead, these big businesses run via credit. That seems really stupid and short-sighted to me.

   Case in point, this last week!!!

4. Tim Little Says:
   October 1st, 2008 at 1:42 pm

   Lynne — Do check out the above-referenced BMG link. I think it will answer your questions.

5. waittilnextyr Says:
   October 1st, 2008 at 5:33 pm

   This financial system is complex, and businesses generally will use credit to get inventory and sales to pay those bills, as well as employee salaries and take a bit of profit. On a very small scale you may be able to have enough cash on hand that you don’t need credit, but on the large scale that would not be an efficient use of assets.

   The financial house of cards is very tenuous, and if credit gets shut off there will likely be a significant fallout. Maybe another system would not be so fragile, but that is the one we have.

6. Lynne Says:
   October 2nd, 2008 at 8:28 am

   Maybe that means our businesses are too big. Conglomerates and practically, in many areas of businesses, monopolies. Maybe it’s time for another breakup of vertically and horizontally near-monopolies.

7. waittilnextyr Says:
   October 2nd, 2008 at 8:48 am

   It might be interesting to see how businesses have consolidated into larger corporations over time. The usual objection to such consolidation is the loss of competition, but now it may also be the risk to the economy as a whole.

   But it seems that we are seeing even further consolidation with the failure of the investment banks in the past few months. All the more reason to regulate, and possibly even nationalize.

8. Corey Says:
   October 2nd, 2008 at 10:48 am

   Unrelated, but The Sun endorsed McCain:

   http://www.lowellsun.com/breakingnews/ci_10616678

   The word “Obama” never appears in this endorsement. The word “Palin” never comes up. If this was 2000 or maybe even 2004, this endorsement would make some sense to me even if I didn’t agree. I know the paper leans to the right, but wow…

9. waittilnextyr Says:
   October 2nd, 2008 at 1:10 pm

   The economy is starting down a slippery slope:

   US auto sales plummet
   Automakers log dismal September sales amid the credit squeeze. A separate report predicts 3,800 dealership closures nationwide.

   By Elizabeth Strott
   Analysts had already predicted that the credit crisis would take a bite out of auto loans — and, therefore, out of auto sales. On Wednesday, we learned just how bad things are.
   -Americans bought 964,873 vehicles last month, the first time in 15 years that monthly U.S. sales fell below 1 million.
   -Ford Motor reported a whopping 33.8% decline from last September, far worse than the expected 22% decline.
   -General Motors reported a 15.6% decline in September sales, better than analysts’ expectations for a 26% drop.
   -And Chrysler, which is majority-owned by private-equity firm Cerberus Capital Management, reported a 33% drop.

   “An already weak economy compounded by very tight credit conditions has created an atmosphere of caution,” Jim Farley, Ford’s worldwide-marketing chief, said in a statement Wednesday. “Even if you have good credit, there’s a reluctance to pull the trigger on a big-ticket item” like a car.”

10. Ryan Says:
    October 2nd, 2008 at 6:33 pm

    The decline in auto sales is for any number of reasons. Shitty, gas-guzzling American cars being just one of them…

11. kpem Says:
    October 2nd, 2008 at 10:21 pm

    The credit crucnh did not hit Hybrids?? Honda and Toyota had hybrid sales increases. Maybe the assumption should not be tight credit restrictions but not having the product people want. I went to a chevy dealership last month that had about 80% gas guzzelers on the lot.

12. -b Says:
    October 3rd, 2008 at 9:55 am

    When I first heard about the bailout I was disgusted. I oposed it on the “moral hazzard” argument - you don’t reward bad behavior.

    Additionally, I have always been disgusted with the federal governments lack of fiscal responsibility, so this bill makes my stomach turn. We are slowly headed towards the same scenario that Germany went through in the early 20’s - a very ugly situation.

    However, as I have come to understand the problem more, I have come to think that the bailout is a neccessary evil.
    The damage done by doing nothing appear to far outweigh the costs of taking action.

    Just one of many examples that the credit crunch is very real was posted on Drudge today:

    Schwarzenegger to U.S.: State may need $7-billion loan -
    http://www.latimes.com/business/la-fi-calif3-2008oct03,0,5726760.story?track=rss

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