Released: October 02, 2008

The credit crunch spreads

Source: Peter Coy, BusinessWeek

The credit crunch hit 2640 Merchant Drive in Baltimore in September when Drew Greenblatt asked his bank for a $175,000 increase in the line of credit for his thriving company, Marlin Steel Wire Products. The bank said it wouldn’t give him the money unless he put an equal sum into a certificate of deposit. In other words, the bank wasn’t willing to let one more dime out of its sight. “It’s laughable,” says Greenblatt, not quite laughing. “We’re a profitable company. When banks can’t service guys like me, how are they doing it for the other guys?”

The 14-month-old credit crunch has entered a frightening new stage—one in which even healthy sectors are vulnerable and contagion is spreading to Europe and Asia. An explicit guarantee from the U.S. government has succeeded in keeping money flowing to prime home buyers through the Sept. 7 takeover of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), which were able to sell $12.8 billion in debt in September. But that’s not helping other parts of the U.S. economy, where manufacturers, car buyers, and local governments are struggling.

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