Banks no longer lending money to people and businesses that can not pay the loans back is good business, not a credit crisis.
If I read this report right, lending was still going on as usual. Most businesses were fine.
Down is up and up is down these days...where have you been?
Particularly when conversion of investment banks to banks, as well as acquisitions, requires deleveraging. Newly raised capital will go to bolster balance sheets, not to lending. Of course the Fed knew that.
Even if they had enough cash flow, many businesses assumed that they could always get credit to make payroll or short term purchases and do more long term things with their cash. That worked fine as long as they could get short term credit. No short term credit because the bankers are panicking over their other mistakes means the entire house of cards falls.
I did the same thing too by taking out a home equity loan to pay off my regular mortgage because the interest rate was cheaper. I then paid down my equity line and had essentially no cash in savings and checking because I could always get it back out of equity easily. During normal times that made sense because paying down a 6% mortgage, even temporarily, was a better use of the cash than making 0.5% in checking or savings. However, the bank doesn't have a legal obligation to continue to extend that line and I would have been in a world of hurt if they cancelled new lending from it. I have since corrected that problem.
If you can’t trust you banker who can you trust?
The Bank dick with WC Fields.