Here’s a post from the always provocative Marginal Revolution blog, asking whether there is indeed the kind of squeeze on credit for nonfinancial (read: commercial) businesses that the Treasury Department, the Federal Reserve and the administration (with the help of Congress) has been hollering about.
Alex Tabarrok, an economist at George Mason University, writes:
Three economists at the Federal Reserve Bank of Minneapolis, Chari, Christiano and Kehoe, now further support my analysis pointing to Four Myths about the Financial Crisis of 2008.
- Bank lending to nonfinancial corporations and individuals has declined sharply.
- Interbank lending is essentially nonexistent.
- Commercial paper issuance by nonfinancial corporations has declined sharply and rates have risen to unprecedented levels.
- Banks play a large role in channeling funds from savers to borrowers.
Each of these myths is refuted by widely available financial data from the Federal Reserve. It’s a short paper, read the whole thing.
None of this means that everything is cheery. Like most people I think that we are in a recession which is likely to get worse but we need to remind ourselves that recessions are normal. What is not normal is the current level of panic.
The links should take you to the Federal Reserve paper. (Has anyone asked Ben Bernanke about this?)