Lending Coming To A Halt?

[question everything]

Lending Coming To A Halt?
Posted By:Bob Pisani


Credit is the lifeblood of the economy, and there are signs that credit activity is pulling back.

Consider these two data points:

1) Agricultural stocks are down on word that fertilizer demand has been down--why? Agricultural stocks are getting hit hard today: CF Industries down 18 percent, Agrium down 12 percent, Terra Industries down 20 percent, Mosaic down 11 percent. Citigroup downgraded the group on word that urea (a nitrogen product used in fertilizers) prices were down substantially on what appears to be weak demand. Why is demand down? Traders have been speculating that the farm harvest now requires its largest seasonal financing requirements, and that farmers are having trouble getting funding.

2) credit appears to be tightening for restaurant franchisees as well. Last week Bank of America declined to increase lending on existing loans to McDonald's franchisees. Now the CFO of Sonic Corp., a drive-in restaurant chain, told Dow Jones that franchisees have been notified by GE Capital that it will temporarily stop financing new loans, although GE Capital will continue to honor pre-existing financing agreements.

These are two small data points, but in two important industries: fertilizers and restaurants.

We need to improve the balance sheets of the banks and increase the liquidity in the system. Otherwise lending is coming to a halt.

http://www.cnbc.com/id/26904496

[stray cat]

1. absolutely

[question everything]

4. Except, try to explain this to people here (nt)

[dysfunctional press]

9. not just here- all across the country...too many people don't understand what they are wishing for.

how's it going to end...? :shrug:

[demnan]

2. That's what the Great Depression was all about

No liquidity.

[JDPriestly]

6. Let's turn on the faucets after the November election.

Let the American people see what 8 years of free markets running wild do to a country.

Let's get back to a sane government and sane regulation of a sane economy.

When in crisis, wait to act until you have all the facts. We do not have them yet.

[Skink]

3. The Fed offers liquidity not the congress.

Congress is doing the right thing in debating wether or not to clean u the mess.

[JDPriestly]

5. So, the banks have waited until weeks before the election to

stop the flow of money. They are blackmailing voters. This is how these Republican cads plan to steal the election this time. This can wait. The farmers can buy the fertilizer after the election.

I would not mind seeing a few of the McDonalds restaurants close down. We do not need to be buying cars and houses right now.

Fertilizers can wait. Fast-food restaurants can wait.

Democrats need to focus on getting the Republicans out of the White House and putting a Democrat not only in the White House but in the majority in Congress. That is the only way to solve the problems in our economy.

[nadinbrzezinski]

7. This is the LAST thing they need to get elected

for the same reason they hated FDR

:banghead:

[question everything]

8. No, this has been building for several weeks.

For example, with WaMu, it was reported that customers took $16.7 billion in cash from their accounts in the nine days prior to Thursday's takeover, making it hard to be liquid.

With the continuing housing market sinking, the mortgage papers and banks and other financial institutions were holding were losing value, fast, which made their cash to asset ratio more difficult.

I think this is what happened in the Great Depression, when people ran to the banks to take all their money.

[nadinbrzezinski]

11. This run on banks is one of the things that happened

during the depression, you are correct

[Zenlitened]

10. Huh? "Farmers having little problem getting ag credit"

http://www.nytimes.com/aponline/us/AP-Farm-Scene-Farm-Credit.html

By THE ASSOCIATED PRESS
Published: September 26, 2008
Filed at 5:11 a.m. ET

WICHITA, Kan. (AP) -- The economic turmoil on Wall Street has not reached the dusty country roads in the nation's Heartland, where a rural economic boom has meant farmers are not having much trouble getting loans to plant crops, buy land and replace equipment.

''The fundamentals of agriculture right now, in terms of income and opportunities, is good. There are profits to be made, so I think that is underpinning the willingness to lend to that sector,'' said Jason Henderson, a branch executive with the Federal Reserve Bank of Kansas City.

(snip)

Henderson, the Omaha branch executive who writes that quarterly snapshot, said although the official third quarter report will not be available until later this year, they have found anecdotally in talking to bankers that Wall Street's financial troubles have not affected rural banks' funding sources or changed their farm lending practices much.

(snip)

So many Kansas farmers have been able to obtain loans through their hometown banks that the agricultural loan volumes of government lenders like the Department of Agriculture's Farm Service Agency have actually gone down.