From Another Credit Crunch

The New York Times from November 1991:

Is the credit crunch real? Are banks denying creditworthy businesses the loans they need to invest the economy out of the recession?
The idea certainly appeals to the White House, which is in hot pursuit of a villain or three to explain why the stalled recovery is not the President’s fault. But many economists remain skeptical. The fall in the volume of bank loans, they point out, could be explained equally well by a recession-induced decline in the demand for credit.
Or at least it could until now. Minds are bound to be changed by the release of the first serious analysis of the crunch hypothesis, by Ben Bernanke of Princeton University and Cara Lown of the New York Federal Reserve Bank. The study, to be published in the January issue of the Brookings Papers on Economic Activity, confirms that a scarcity of bank capital has indeed affected the supply of loans. But the two economists believe that the full weight has been felt only in the Northeast. And they say the impact on jobs and incomes may be smaller than anecdotes of businesses’ drying up for want of liquidity would suggest.

Posted by on June 24th, 2008 at 11:54 am


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