Credit Crunch 2009: The Continuing Recession & It's Effects on Credit

Abstract

A credit crunch is a period where there is limited available credit to access, a time period where guidelines are tightened and very few people can get approved for any type of loan. We have experienced these in the past, but it has been an especially rough time in 2009. Financial institutions have failed with the combination of the stock market crash in 2008 and the housing bubble collapse that we have seen in recent years. Government intervention led to a bailout program to save the banks, but the government seemed to leave someone out: the consumer. Data will show that the delinquency rate of loans has staggered quite high in 2009 which gives evidence to support those consumers are distressed. Not only do they not have available funds that they can currently access, but more data shows that lending standards have severely decreased leaving these distressed customers with no available options to them. The Federal Reserve is pulled as tight as it can be, allocating assets to different areas and trying to come up with innovative ways to help but unfortunately have not been able to help the average middle-class American through this economic crisis. We are left with the question- did we make the right decision? We can only hope that the bank bailout was the correct choice, although I do not believe that we are achieving the desired results. The consumers are still suffering and until we can fix that we cannot stimulate enough economic activity to get us out of this recession. Government intervention played a key role in the recession, a place where our capitalist society should have let the free markets work. If the government felt obligated to bail someone out, it should have been the consumers.