Credit Crunch begins to ripple through economy
The U.S. economy's take-off from a near standstill in the first quarter may prove bumpier than the Federal Reserve and many on Wall Street expect as tighter credit acts as a headwind to growth.
What started as a financing squeeze in the subprime- mortgage market now threatens other parts of the economy. Borrowing costs for companies are climbing as banks and investors demand more for their money. Consumers feel the pinch from rising interest rates and sagging house prices.
The reduction in available money for loans is rippling out from the sub-prime market. Because there isn't as much money available for credit and investors are looking for more safety, the cost of credit is climbing. And that could slow economic growth in the economy as a whole.
Jay