You would think that fed cuts would spur the availability of credit. The opposite seems to be the case. Banks are now tightening (lending standards) credit for consumers and now businesses.
It is harder for the average American with less-than-pristine credit to even get a car loan at a reasonable rate, much less a mortgage.
Second, lenders are looking to make more money on the loans that they approve, widening the "spread" between what money costs them--so they are adding more on top of their costs.
The Dominoes
- When businesses can't get credit, business is in danger of contracting
- There could be more layoffs
- Unemployment will rise
- Consumers and businesses who do qualify for loans will pay much more.
- Consumers will have less spendable income
- Less spendable income means lower retail sales
- Businesses will have lower profits
- Fewer homes will be sold
- Prices of homes could fall even more
Does this have a familiar ring?
"I submitted this legislation to the Congress almost a year ago. It is time for the Congress to act--
- To help those in need of job training, I urge the Congress to pass the Manpower Training Act which provides an automatic increase in manpower training funds in times of high unemployment. I submitted this proposal to the Congress 10 months ago. It is time for the Congress to act.
- I ask for full appropriation for the Office of Economic Opportunity and I request the Congress to provide at once a supplemental budget of $50 million to provide useful training and support to young people who are out of school in the summer months.
- To further protect the small investor, I support the establishment of an insurance corporation with a Federal backstop to guarantee the investor against losses that could be caused by financial difficulties of brokerage houses. While this would not affect the equity risk that is always present in stock market investment, it will assure the investor that the stability of the securities industry itself does not become cause for concern.
- To stimulate an industry bearing the brunt of high interest rates, I urge enactment of the Emergency Home Finance Act of 1970. This would attract as much as $6 billion into the housing market in the coming fiscal year. More than a third of a million families need this legislation for home financing now; and the resulting new construction of more than 200,000 houses will also help provide many new jobs.
- This housing bill was passed unanimously by the Senate. It has been awaiting action for 3 months in the House. It is time for the Congress to act.
- To help the small businessman who finds it difficult to get necessary credit, I have asked the Congress for greater authority for the Small Business Administration to stimulate banks and others to make loans to small businesses at lower interest rates. I submitted this legislation to the Congress 3 months ago. It is time for the Congress to act.
- And finally, to curb inflationary pressures throughout our economy, I call upon the Congress to join me in holding down Government spending to avoid a large budget deficit. This requires a new restraint on spending programs and the passage of the revenue-producing measures that I have already made.
- There is an old and cynical adage that says that in an election year, the smart politician is one who votes for all bills to spend money and votes against all bills to raise taxes. "
(The above is from President Richard M Nixon 192 - Address to the Nation on Economic Policy and Productivity.
June 17th, 1970
THE POLITICIANS HAVE BEEN TALKING ABOUT THE SAME THINGS FOR OVER 40 YEARS!
