Where credit flows freely

Since we're routinely tagged as doom-and-gloomers around here, we pause this morning to look for silver linings.  We look past an 11-year low in the S&P 500, a 16-year high in unemployment claims, the delayed-but-not-dead bailout of the zombie U.S. auto industry, and the revelation it was Hank Paulson himself who threatened Congressmembers with martial law if they didn't authorize him to buy up toxic assets (which he then decided not to do)… and see a bright side.

Yes, credit has frozen up — but only for the spendthrift.  Credit-worthy borrowers who actually benefit their fellow humans buy developing products and services they want have no problem.  From the Boston Globe:

Even as consumer loans become harder to get, many small businesses in Massachusetts report they are still able to borrow money.

In Franklin, Stephen Dunn, president of design and manufacturing firm Core Concepts Inc., says Benjamin Franklin Bank has invited him to renew his $1 million line of credit. In Woburn, Mike Jenoski, president of Duplication Management Inc., a printing and Web services company, says Enterprise Bank is encouraging him to borrow to expand his business. And in Jamaica Plain, Katherine Mainzer, co-owner of Bella Luna Restaurant and the Milky Way Lounge, says she is about to close on a $360,000 loan from Citizens Bank to relocate.

Somehow I doubt this is limited to Massachusetts.  Reporters at every paper in the country could go out and do a similar story, I'm sure.  "Nationally, some economists have made similar points," says the Globe. "In a paper last month for the Minneapolis Federal Reserve, three economists said bank credit continued to rise, at least through Oct. 15, as have the total amounts of loans and leases." 

The other theme that emerges from the Globe piece is there are scads of smaller banks that steered clear of the worst excesses of Greenspan's EZ credit splurge and are prepared to weather an economic storm far better than, well, Citi.  Whatever emerges on the other end of this storm, let's hope it involves a smaller, more localized banking industry that cares more about capital formation than about creative leverage.

Anyway, it's good to know quality businesses can still get credit because they still do things that are in demand.  Which brings us to (shameless commerce time) the next event in our Emergency Retirement Recovery Series.  Agora Financial Managing Editor Chris Mayer is at the helm of this free webinar — in which he'll reveal the names and ticker symbols of two stocks he thinks are solid buys to help you weather a tough market.  Just sign up here and we'll shoot you an e-mail linking to the webinar when it's ready on Monday morning.

The Daily Reckoning