Take a deep breath and say it all at once: the Global Financial Stability Report by the International Monetary Fund.
Inhale again and sit down. The news is not good.
The IMF has done an excellent job since the credit crisis began -- way back in August 2007 -- of tracking how the financial system's distress has hit the "non-financial sector," also known as the "real economy." This is powerful intellectual ammunition for those who would make the case that banks should go back to playing their old role of facilitating the flow of credit to the rest of us, rather than making big bucks off of exotic securities.
They continue to document what we already know, namely that credit has turned tight even as this recession winds down, and that it's as bad as it's been since the Great Depression. In this report, they give powerful evidence that it's better to be a big business than a small one.
The fund estimates that the non-financial business community in the United States is facing a credit shortfall of about $280 billion in 2010, one that will shrink to $50 billion in 2011. The only good news is that the Federal Reserve's emergency borrowing programs have helped bridge the gap, but the Fed ended its main program at the end of March.
The IMF does point out that the conditions for credit are easing - you can get more money, at more reasonable rates - than, say, 2 years ago. But there's an important caveat:
If you are a small or medium-sized business, you are screwed. Big companies can tap capital markets by selling bonds or stock to raise money ("nonbank credit," in IMF parlance), an avenue not open to a company with, say, 20 employees that serve a local market. They need their own banker, the person they sit down with at the nearby branch, to give them a loan.
Or, as the IMF puts it.
... nonbank credit has only provided a partial substitute for bank lending and total credit growth has fallen. In general, in addition to households, small and medium-sized enterprises (SMEs) tend to be largely reliant on bank lending and so still face credit constraints.The IMF report highlights a broader, seldom-understood point to be made about the American economy: the tilted playing field not between labor and capital but between big corporations and small businesses. Big corporations can get their loans, and Big Banks are "too big to fail."
That leaves your average small business owner out in the cold.
Olivier Blanchard image from the IMF via Flickr