Credit crunch may only have just begun, S&P warns

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By Alistair Barr, MarketWatch
Last update: 5:18 p.m. EST Feb. 20, 2009
Comments: 1414
SAN FRANCISCO (MarketWatch) -- The credit crunch may only be in its early stages and a bigger contraction in lending in coming months could have "serious implications" for the U.S. economy, Standard & Poor's Rating Services said Friday.
While politicians and others have complained that banks aren't lending, the data on credit outstanding credit in the U.S. only tenuously supports this idea, the rating agency said. See related story.
"What's behind the apparent difference between perception and reality?" Standard & Poor's credit analyst Tanya Azarchs said. "It may be that, while growth in overall credit was positive through at least third-quarter 2008, it has risen at a slower pace than at any time since 1945 -- far below the 8%-10% rate in most years."
Banks are replacing loans as they mature, but there's little net new loan growth, she noted.
"That could mean that the slowdown in lending is just an opening act, and a true credit crunch may yet take the stage," Azarchs warned.
Banks are making fewer and fewer commitments to lend, and new issues of bonds and securitized assets have slowed to a trickle, the analyst said.
"This portends a contraction in total credit available in the coming months," she wrote. "Since this lack of lending may have serious implications for the economy, the U.S. government has been devising policies that would encourage banks to lend."
Given such pressure, S&P is focusing more on whether banks are free to make loans they think are prudent and on the health of the overall economy, Azarchs said. End of Story
Alistair Barr is a reporter for MarketWatch in San Francisco. http://www.marketwatch.com/news/story/Credit-crunch-may-only-have/story.aspx?guid={4F0DA616-A789-49A7-9EFE-A65C5A0986F9} --- MORE GOOD NEWS!! :sarcasm: