The NYT is spreading fear at a very bad time. It told readers that "Credit Enters a Lockdown." The information in the article doesn't back up the case.
Much of the story seems to rest on the experience of a mortgage broker in Cape Coral, Florida. According to the broker, "The underwriters are terrified and they’re dragging their feet, and making more excuses not to close loans ... Basically, they just don’t want the deals.”
Cape Coral is on the West Coast of Florida, which is ground zero for the housing bubble. House prices in the area are plummeting. No one in their right mind would make a real estate loan in this area even if they had more money that Bill Gates.
While the banking system is clearly impaired by its mountain of bad debt, it is still expanding credit at a modest pace. For example, credit card debt grew at a 3.5 percent annual rate and a 4.8 percent rate in July. This growth is not consistent with a credit freeze up.
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