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Nov 3 / Jonathan

What credit crunch?

Thus Mike Meyers in the Star Tribune:

The nation indeed may be facing a financial crisis, with large institutions failing in the wake of multibillion debts, but most bank-lending to business customers actually has been on the rise.

“The story goes that they [banks] are holding on to the money or putting it into Treasury bills,” said Lawrence Christiano, a Northwestern University economist and consultant to the Federal Reserve Bank of Minneapolis. “That seems to fly directly into the face of the evidence that’s out there.”

The latest government numbers, through mid-October, show bank commercial and industrial loans up, bank commercial real estate loans rising and interbank loans climbing. Indeed, from September 2007 to mid-October of this year, the numbers in all three categories have climbed consistently.

Four claims about the nature of the nation’s financial crisis appear to be myths, [Chari, Lawrence Christiano, a Northwestern University economist and consultant to the Federal Reserve Bank of Minneapolis, and University of Minnesota economist Patrick Kehoe] concluded.

Their findings:

  • Bank lending to corporate America and individuals has not declined.
  • Lending between banks has not dried up.
  • Commercial paper (short-term borrowing by nonfinancial companies) has fallen, but not seized up as a source of commercial lending. (Indeed, commercial-paper levels last week started to head back up for the first time since the failure of Lehman Brothers, in mid-September.)
  • Banks do not, as popularly believed, play a large role in channeling money from savers to borrowers.

I’m skeptical, frankly, but an explanation would be welcome.

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