THE USUAL CYCLE….The New York Times reports that the volume of short-term commercial loans has dropped 3% this year, the largest annual decline since 2001:
Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring.
….Drew Greenblatt, president of Marlin Steel Wire Products, figured it would be easy to get a $300,000 bank loan to finance a new robot for his factory in Baltimore….But when Mr. Greenblatt called the local branch of Wachovia — the same bank that had been aggressively marketing loans to him for years — he was distressed by the response. “The exact words were, ‘We’re saying no to almost everybody,’ ” Mr. Greenblatt recalled.
….Some suggest that the banks, spooked by enormous losses, have replaced a disastrously indiscriminate willingness to hand out money with an equally arbitrary aversion to lend — even on industries that continue to grow.
“There’s been a lot of disruption in the credit market, and a lot of traditional lenders have really tightened up,” said Gregory Goldstein, president of Macquarie Equipment Finance, which leases computer gear and other technology to companies. “Before, some of the standards they lent on were weak, but we think they have overshot and gone too far on the other end.”
Gotta laugh at that one. Of course banks overshot on the way up and are overshooting on the way down too. That’s what always happens. It happened with savings and loans, it happened with South American loans, it happened with dotcoms, it happened with housing, it always happens. Bankers, as near as I can tell, have about as much common sense as the average lemming. The Fed can help, but it can’t turn them into a different species. Buckle up.