News Columns & Blogs

Is the credit crunch finally over?

This Bloomberg story suggests that the credit crunch is about over as banks regain their confidence to lend to each other. The so-called TED spread is the difference between government and corporate (LIBOR) interest rates.  The narrower the gap, the more confident banks are in lending to each other, and then to other companies.

That’s great news. It was the credit crunch that made this recession deeper than average by cutting off credit to companies that needed it to operate. As the cost of lending comes down and the ease of lending goes up, it will eventually lead to the rise in the amount of lending. That is a key first step for the economy to start growing again.