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July 28, 2008
"Banks struggling to recover from
multibillion-dollar losses on real estate are
curtailing loans to American businesses, depriving
even healthy companies of money for expansion and
hiring.
Two vital forms of credit used by companies —
commercial and industrial loans from banks, and
short-term “commercial paper” not backed by
collateral — collectively dropped almost 3 percent
over the last year, to $3.27 trillion from $3.36
trillion, according to Federal Reserve data. That
is the largest annual decline since the credit
tightening that began with the last recession, in
2001.
The scarcity of credit has intensified the strains
on the economy by withholding capital from many
companies, just as joblessness grows and consumers
pull back from spending in the face of high gas
prices, plummeting home values and mounting debt."
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