“In the sense that if the credit market dries up on Wall Street, capital will be unavailable on Main Street,” said University of Arizona political science professor Robert Maranto. “So no car loans, house loans, business loans and the like.”
The “political science” professor is NOT an economist and Wall Street is not main street.
Notice who is being “bailed out” for the most part - “Wall Street” investment “banks” - not Citibank (just bought Wachovia), not Chase (just took over WaMu), not Bankamerica. Notice also that the last remaining “investment banks” - Goldman Sachs and J.P. Morgan will become full fledged commercial banks, as well.
It is revenue on “Wall Street” not revenue on main street that is drying up, or in a better sense, the ability for “Wall Street” investment banks to raise revenue (among all industries their stocks are the most in the tank).
Commercial banks have the millions of depositors and credit card customers that, by the nature of the normal economic activity, generate new revenue.
It is the credit market “to” Wall Street that is becoming illiquid, but outside “Wall Street” investment banks, in the commercial/residential banks and the rest of the businesses in main street (companies that actually produce something), revenue continues, and, if everyone does not get too excited, so will “credit” (based on that revenue).
It amazes me that the idea is accepted so easily that with Merrill et al gone companies cannot get their equities traded on stock exchanges. What, you think companies themselves cannot buy their own seat at an exchange and hire brokers at Schwab or E-Trade? They have to have a Merrill do it for them? Or, that they cannot themselves go to the private capital markets and provide warrants directly to investors instead of paying Goldman millions to borrow the money for them? The money, the capital is out there; it’s just not sitting so much in the companies that squandered it.
I (personally) know about a few billion in a few current deals that have no banks of any kind involved and I am not even in the business and my friends are small fries in it.
If commercial and community banks need operating capital,don’t they borrow from the Federal Reserve,at reduced rates,and then loan that capital at market rates.....or am I wrong in my thinking?
So if the Fed operates,where is the credit problem on Main Street?