the contraction in credit is linked quite closely to the actions the govt is making...
Just one example.
Banks blame government for lack of lending
Capital requirements, intrusive regulators slow flow of credit, they claim
NEW YORK — Banks that are being scolded by the government for not lending are blaming a new obstacle: The government itself.
Fearing more bank failures, federal regulators are forcing institutions to hold more money in reserve and scrutinizing loans. But bank executives complain that the extra oversight thwarts their ability to quickly pump billions of bailout dollars into the ailing economy.
Banks say they are caught in a frustrating Catch-22: How can they make more loans when creditworthy borrowers are scarce, their balance sheets are saddled with bad debt and regulators are hounding them to horde cash?
“We want to lend, but the regulators are flat-out telling us, ’Get your capital up.’ Then there’s Congress telling you to lend it all out,” said Greg Melvin, a board member at FNB Corp., a Hermitage, Penn.-based bank that got $100 million in bailout money.
“Two arms of the government are saying exactly the opposite thing — it’s ridiculous,” added Melvin, who is also chief investment officer at investment firm C.S. McKee.
Regulators say they are only being careful, and they deny slowing lending.
http://www.msnbc.msn.com/id/28985294/