February 9th, 2009
Why Banks Have Been Extending More Credit Even as they Clamp Down
Thought you could not get a loan ?
While credit scores have been dropping, even for consumers with perfect payment histories, and banks are refusing to lend based on those lower credit scores, the amount of money being lent still increased in 2008.
How can that be?
Both consumers and businesses have been tapping into sources the banks did not expect them to use: previously issued lines of credit.
Commercial borrowers that financed themselves through securities markets had purchased and paid for back up lines of credit. Now, unable to get the financing they need for expansion, they’re using those lines.