Is there relief in sight for the “Credit Crunch”?

To begin, the standing total for lending institutions that have folded is currently: 185

I am sure that the former employees of these companies would argue that any relief would be “too little, too late”… However, there have been several interesting events in recent weeks that could have both positive and negative effects on the current credit situation.

The Federal Reserve has stepped in and begun to lower the Fed Funds Rate, which is in turn reflected in the “Prime” rate available to consumers. This move by the Fed is typically a mechanism used to minimize the effects of inflation. It does, however, influence the movement of money between the stock and bond markets in the US. This movement of money and general activity in the markets actually goes a long way toward building consumer confidence and subsequently shift the American public out of the “credit panic mode”

Interestingly, investors and investment funds are finding ways to regain some of the losses they incurred due to the collapse of the sub-prime/Alternative lending industry. Large US corporations are issuing corporate bonds with some of the highest yields (profit to the bond holder/consumer) in those companies’ history. Investors are demanding to make more money in order to assume the risk of purchasing corp bonds over US Treasury Bonds. To me it seems like the public is telling “big business” that they will be glad to help keep it afloat, but they’re going to need to make back some of the money that they previously lost. On the flip sde of that, “big business” is waving their white flag and surrendering a larger portion of their profits in order to gain public support and to keep the corporation strong enough to weather the rest of the storm.

Wow!… It actually seems like the two are working together to pull each other through the muck.

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