Domino Effects of Credit Crunch Could Have Severe Consequences

7/28 - "In a turn that no one could have expected, the banking community is in such a tight credit fix that even companies with near-perfect credit cannot get loans...Bank credit is now declining at an annualized pace of more than 6 percent. The Times calculates "That is a drop of nearly $150 billion, an amount much larger than the value of the tax rebates the government has sent to households this year in an effort to spur economic activity."

"The news further calls into question the actions of the Fed which has given hundreds of billions of dollars in cheap loans to major backs and cut interest rates to make it easier for them to borrow. As it turns out, virtually none of this is making it back out of the banks in the form of corporate loans.

The domino effect could be tremendous, and economically dangerous. A lack of funds to credit-worthy business will almost certainly shut down expansion and capital spending."