Facts vs. the Narrative

The narrative is that small business credit markets are frozen.  John Stossel argues the facts say otherwise?

More melodramatic prose from today's Washington Post: "White House moves to free up lending for small businesses."  "Unfreeze the markets." "Free up lending." Given such language, I would think that loans to small businesses have stopped. The market must be broken, right?

... lending to [small] companies has fallen. Federal data show that lending to small businesses by community banks declined by about $8 billion, or 2 percent, between September 2008 and September 2009.

A decline of two percent. TWO PERCENT. That constitutes a credit "freeze"? Considering the rash of bank failures from 2008 - 2009 due in large part to bad loans made by banks, a decline of two percent in loans to small businesses strikes me as a prudent response.

So does our science-based President address the narrative or the facts?  Here is a hint:  narratives can affect elections, while facts are often ignored.  Therefore, Obama is proposing to use $30 billion of TARP money to so something about the $8 billion drop in small business lending.

  • Captain Obviousness

    I suspect most of the drop in lending is due to a lack of demand not a lack of willing lenders. Between the weak economy and the uncertainty of what crazy schemes Congress/Obama can come up with in the future, there are plenty of reasons why businesses would be less eager to take on new debt now than they were 2-5 years ago. Any attempt at "stimulating" or incentivizing banks to lend more is just going to be pushing on string until businesses want to borrow more. Of course, once demand for loans picks up again, any government program to encourage lending will just distort the market and encourage borrowing on riskier projects than would have been undertaken in a free market for loans.

  • ElamBend

    I have a friend who is a business broker and he said for a while last year it WAS really hard to get financing for really good cash-flowing businesses, mostly it was a function of a sudden tightening of regulation by the SBA. Those restrictions have not loosened, but unfortunately, most of the businesses aren't doing as well and the owners can't get prices they want or that make sense for the time being.

  • Dr. T

    Did you read the latest "Fact vs. Narrative" story?

    Crude oil prices are the highest they've been in 17 months, and this is touted as GOOD news.

    The narrative given by most mainstream media is that the rise in oil prices indicates an improvement in the US economy. (Funny, they never said that when oil prices went up during the Bush presidency.)

    The facts are that the rise in oil prices is due to increased global demand and to US oil refineries topping up their crude oil storage tanks to get ready for making the dozens of varieties of gasoline needed this summer. The increased costs of gas, diesel, and oil-based electricity will slow down any economic recovery. Increased fuel and power costs are NOT a sign of economic improvement, because manufacturing, employment, and personal travel have not increased in recent weeks. But, these facts don't fit the "Obama is improving the economy" narrative, and the media prefer touting pro-Obama bullcrap to telling the truth.