It is time for Ben Bernanke to descend from Mount Olympus and join the Croesus of the administration, Henry Paulson, in the the trenches, or the tranches, depending on your perspective.
Late word is that the Fed may cut interest rates. Up until recently, the odds for that were long. But, the credit crisis has deepened during the past few days. People cannot borrow a dollar for a cup of coffee and small banks are not giving car loans.
The scope of the recent shaking of the foundations showed up in yesterday’s car sales numbers. Many of the big manufacturers said September sales were off more than 30%. Lack of access to car loans was listed ahead of high gas prices as the primary reason for the fall.
Weak industries are getting weaker at an astonishing rate. Newspaper giant Gannett (GCI) had to draw down on a credit line. Normal access to cash has hit publishers. Bankruptcies of some chains could begin in this quarter.
Several large retailers, especially those with weak balance sheets such as Circuit City (CC), may have trouble financing inventory for the holiday season.
There is absolutely no evidence that access to mortgages is getting easier. As a matter of fact, anecdotal evidence would say that the situation is getting worse.
It is stunning to admit that $700 billion may not fix an economic problem that has become so severe. But, credit trouble is spreading like smallpox and the Treasury’s treatment is unlikely to cure it.
The Wall Street Journal says the Fed is looking at a rate cut. It better giddy-up.
Douglas A. McIntyre
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