Credit crunch disappearing as more funds made available

Katrina Shankle/ April 7, 2008/ 12:45 a.m./ Global Economics

Even as the global economy is facing its darkest days, there seems to loom some form of hope on the horizon. The credit crunch is beginning to evaporate. Mid-size businesses are feeling the liquidity improvement the most. Mid-size businesses are more likely to feel the relief because of their inability to leverage their debts in the spectacular fashion that a few of the large mega-corporations were.

Small and mid-size banks are also lucky in a similar regard. They were more likely to have never distorted their reserves and likewise were fortunate to avoid the majority of the loans that drew the eye of the larger insitutions such as subprime mortgages and derivatives.

Banks and broker/dealers are the ones who are more likely to see their available cash troubles recede and even disappear. The monstrous investment banks who allowed their debt-equity ratios balloon are the unlucky ones in this tale. Business borrowers are the ones who end up being shorted in this deal, however: more collateral is being demanded and the terms are being shortened. They are also being screened with a lot more scrutiny emphasizing on their credit worthiness, assets, and a close monitoring of their cash flows. The hardest hit market at the moment appears to the real estate market. And, as what I am sure comes as a great surprise to everyone (sarcasm) the unemployment rate continues to rise.

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