Credit Crunch

The Federal Reserve Board's latest move to ease the credit crunch is further acknowledgment that the economy is in recession. Fed chairman Alan Greenspan conceded last week that the country is in the midst of a "meaningful downturn" but avoided use of the "R-word" until it is confirmed by two straight quarters of negative growth.By easing reserve requirements for commercial banks, the Fed gave a shot in the arm to a sorely pressed sector of the financial community. Whether banks will actually ease the squeeze on would-be borrowers or put their newly released funds into Treasury securities to improve their earnings and balance sheets is a matter of conjecture.

Beth Hawks' cozy Federal Hill boutique is so chock-full of earrings, scarves, ornaments and other merchandise that customers taking it all in might never guess to what lengths she has gone to stock the shelves. As the post-recession slump drags on, Hawks and her store, Zelda Zen on East Cross Street, are struggling as never before. Longtime suppliers have gone out of business, vendors are demanding payment up front or cash on delivery, and loans and credit are tough to come by. She has resorted to buying inventory on credit cards.

CHICAGO -- The commercial real estate industry remains consumed by a credit crunch that has made financing for nearly every kind of project difficult if not impossible to obtain.Even a year after the issue began to receive widespread attention, the credit crunch continues to feed discussion at all levels of the industry."Money is the mother's milk of real estate, and it is something that we just don't have right now," said Eugene Carver, president of the American Society of Real Estate Counselors.

A plan to use $1 million in federal stimulus money to help build an innovative combined office building-greenhouse on Route 175 in Jessup is faltering because its owner can't get bank financing for the project. Stanley J. Sersen, a 30-year veteran of the energy wars, was forced Wednesday to withdraw his application to Maryland environmental officials for the federal funds, which must be used by year's end. The national credit crunch has stymied his effort to get financing for the project, he said, but he hasn't given up. "As our project is critical to showing how the built environment can stop toxic runoff into the bay, we will continue on our journey to get the project built," he said in a statement.

WASHINGTON -- Federal Reserve Board Chairman Alan Greenspan said yesterday that the "credit crunch," which has made borrowers into beggars and stifled economic recovery, had finally bottomed out."While the crunch is not easing, it's reached its maximum, and there is some evidence that we may not be too far from a basic softening in it," Mr. Greenspan told the Senate Finance Committee."Credit crunch" refers to the tight lending policies that banks have applied with increasing severity as real estate markets collapsed and regulators restricted high-flying financial activities.

WASHINGTON -- Federal regulators are expected to unveil four steps next week to ease the credit crunch.The measures, some of which already have been discussed publicly, probably will include eased accounting rules on problem loans and relaxed treatment for real estate appraisals.But behind the scenes, some regulators are already expressing reservations about the steps, which were developed by a task force headed by Treasury Undersecretary John Robson.Some staff members at regulatory agencies said the task force was under heavy pressure from senior Treasury Department officials to move quickly.

Local lender in Chapter 11 Fieldstone Mortgage Co., the Columbia subprime lender that largely shut down in the midst of the nationwide credit crunch, has filed for bankruptcy protection. The company had more than $100 million in liabilities and less than that in assets, according to its Chapter 11 filing with the U.S. Bankruptcy Court in Baltimore. Cordish takes a partner Baltimore developer Cordish Co. is teaming up with Dennis Gomes, a prominent gaming industry executive, to run gaming projects in the United States and internationally.

WASHINGTON -- In a strong sign that the credit crunch might be easing, banks have become noticeably more willing to lend to businesses, including small companies, the Federal Reserve reported yesterday.Bank executives surveyed by the Fed said they had relaxed their terms and requirements for a wide variety of loans. Even as standards for commercial real estate loans stayed restrictive, the bank executives reported what the Fed called a "fairly significant net easing" of standards and terms for commercial loans.

In his mind, Gary Blucher could picture the gently rolling parcel of Carroll County farmland becoming part of a community where colonial homes in muted tans and blues would soon sprout.But the veteran developer, president of Owings Mills-based Britannia Development Corp., couldn't raise the $1.5 million needed for his project.The nation's economy seems to be improving, and demand for new homes is picking up. Still, developers such as Mr. Blucher -- who turn raw land into finished home lots, including streets, sidewalks, water mains and sewer lines -- face severe problems getting bank loans at reasonable rates.

CHICAGO -- Real estate investors remain firmly entrenched on the sidelines these days, according to a new survey by CB Commercial Real Estate Group.The survey group, drawn from a list of 100 top national real estate investment firms, reported they had acquired only 38 properties across the United States in the first half of 1991 compared to 210 deals during all of 1990."

Time is quickly running out if you want to take advantage of the $8,000 first-time homebuyer credit. The federal credit is available this year through Nov. 30, and you must close on the house by that date to get the benefit. Real estate agents warn that it takes about two months now to close on a house. That gives you until the end of this month or thereabouts to get a house under contract if you want to make sure you meet the deadline. Bowie real estate agent Tuniscia Daniels has sent e-mail blasts to clients warning of the fast-approaching deadline.

If your clunker of a car is about to give out, you'll probably be able to get a good deal on a new one because of the miserable economy. The reeling automotive industry is suffering from its worst sales in nearly 20 years. Car dealers are desperate for shoppers. And auto companies from Detroit to Tokyo are offering steep discounts and incentives to combat the slump. But consumers, worried about the turbulent economy, are holding on to their older vehicles longer. And even if they're interested in buying, the recent credit crunch has made it more difficult to secure car loans.

The Brits had the right idea: Pump capital directly into a handful of big banks to get credit flowing. And the Bush administration deserves credit for moving in the same direction, despite complaints that it amounts to a partial government takeover of banks. That worry should be the least of our concerns right now. Infusing cash into troubled banks may be the quickest way to ease the credit crunch, which is threatening to stall the economy. The robust recovery of stock prices yesterday was a welcome sign that investors felt buoyed by the government's new thinking.

With the economy in turmoil, consumers can't count on much these days. Getting loans for cars, houses or anything else is no sure bet. Credit card companies are clamping down on credit limits. The stock market is taking investors on the bumpiest of rides. The equity in your house is getting squeezed as home prices have halted a once-steep climb. And costs keep going up. What better time to start squirreling away some extra cash - above and beyond that cushion of three months' living expenses the experts say you're already supposed to have on hand for emergencies.

Fire incumbents who ignored credit crunch The editorial "Rescue or rebuke?" (Oct. 3) correctly notes that the $700 billion bailout bill is not an end all to our economic crisis. In fact, the statement, "The collective response in some offices in Washington and on Wall Street was, now what?" only amplifies how loosely all our politicians have played with our money and our trust. Every one of the politicians in Congress failed us, and now middle-class taxpayers will have to pay the bill.

Commercial real estate has battled the nationwide credit crunch better than other industries, but that could be coming to an end. Mall owner General Growth Properties announced this week that debt problems could force it to sell assets or even the whole company. Analysts said the decision highlights a growing problem in commercial real estate as Wall Street turmoil seeps into markets across the country. Some commercial property owners are finding themselves in the same situation as many homeowners.

The days of easy money for many consumers with bad credit may be about to end.In a sign that an emerging global credit crunch may soon affect more U.S. consumers, companies that specialize in so-called "sub-prime" lending to people with blotched credit records -- often via high-interest home equity loans -- are quickly running out of money as banks and investors cut off their funds.The result is that many of the consumers who rely on such loans, frequently as a way to consolidate other debts, may be forced to pay even higher interest rates -- if they can get the money at all.While that could be a hardship for individual consumers, many financial counselors would cheer a trend away from the aggressive marketing of loans they say ultimately will get too many borrowers in trouble.

The Brits had the right idea: Pump capital directly into a handful of big banks to get credit flowing. And the Bush administration deserves credit for moving in the same direction, despite complaints that it amounts to a partial government takeover of banks. That worry should be the least of our concerns right now. Infusing cash into troubled banks may be the quickest way to ease the credit crunch, which is threatening to stall the economy. The robust recovery of stock prices yesterday was a welcome sign that investors felt buoyed by the government's new thinking.

Americans don't have to have a 401(k) to be worried about the havoc on Wall Street. They don't have to be fiscal conservatives to cringe at the billions the federal government has added to its balance sheet to bail out international insurance giant AIG, mortgage lenders Fannie Mae and Freddie Mac, and investment house Bear Stearns. Their anxiety over joblessness, diminished buying power and a depressed housing market have intensified with the wild fluctuations in the stock market and the accompanying credit crunch.

Every one of Constellation Energy Group's 1.1 million electric utility customers can relate to the crisis that forced the company into a shotgun takeover yesterday. Essentially, Wall Street threatened to shut off the power. More precisely, the national rating agencies threatened to cut off the company's credit. And without credit, Constellation was on the brink of losing what it needs to keep nearly all of its multibillion-dollar operation turned on and energized. It was a dilemma common to Lehman Brothers Holdings Inc., AIG Inc. and other financial implosions of recent days.