Business Week has three interesting articles starting at page 122 that relate to the credit crunch.
From BW 5/20/02:
Pg 122 WHO'S GETTING HURT BYT THE LOAN DROUGHT - Small companies are shut out. Big ones face higher costs.
- "At the end of April, outstanding commercial and industrial loans were off more than 7% from their February, 2001 peak." [From reading the chart a decline of about $80 billion.]
- "Volume [commercial paper issued] dropped every month between December, 2001 and April, 2002, to $1.35 trillion, 20% below the peak hit in November, 2000." [A decline of $337.5 billion, by calculation.]
Thus, these two sources of funds for corporations have drained about $420 billion from corporate coffers and the drain seems to be accelerating in the commercial paper market due to the changes to FASB 133 requiring banks to mark to market backup lines of credit. All this comes at a time when banks have no intention of taking up the slack, "Explains Chad Leat, Co-head of syndicated lending at Citi-Group: 'There are just fewer banks out there making commercial loans.'" pg 123
In this context, fed tightening that many are calling for would be nuts. JMO
The other two articles are on FASB, including comments on 133, and the impact that the mortgage cycle has on bonds.
ij |
