Credit crunch far from pre-recession levels

Aaron Pressman

The debate has raged back and forth over the likelihood of a recession in the United States this year or, perhaps more importantly to the stock market in the short-run, the likelihood of a Federal Reserve interest rate cut. Alan Greenspan weighed in the other day with a 33% chance. Those fears are arising in part from the growing mortgage market problems have been compared to the savings and loan crisis that fed a severe economic slowdown in 1990 and 1991. That happened as lenders pulled way back on credit standards. Without access to credit, few businesses can expand. Is it happening again?

At least one revealing data point says "not yet." The National Federation of Independent Business conducts a monthly survey of its members on a variety of economic questions, including how the availability of credit compares to three months earlier. Back in the late 1980s, the survey showed a gradual tightening of lending culminating with a sharp drop in the first half of 1990.

Well, the February survey is just out and credit conditions at small businesses actually improved for the second straight month. February's reading was identical to last February and the month-by-month trend shows slight improvement in credit availability since the summer. The percent of borrowers whose credit needs have been satisfied is also up since a year ago.