Meredith Whitney, CEO, Meredith Whitney Advisory Group, formerly of Oppenheimer, writes in an opinion column on the WSJ that the credit crunch still has a ways to go and warns that anyone counting on a meaningful economic recovery will be greatly disappointed.
According to Whitney, small businesses in the U.S. have never had a harder time getting access to credit and the dynamic is being reflected in dismal consumer spending trends.
“In the U.S., small businesses employ 50 percent of the country’s workforce and contribute 38 percent of GDP,” Whitney wrote. “Without access to credit, small businesses can’t grow, can’t hire, and too often end up going out of business.”
Small business loan credit-card lines have already been cut by over 25% this year, and this trend, notes Whitney, will only continue. She points out to the most recent Fed data that showed small business lending receding at a 3% clip, or $113 billion, from 4Q 2008 peak levels—the first contraction since 1993.
Whitney also noted in her piece that smaller banks should be provided incentives to step up small-business loans on a greater scale.
“I believe that we are only in the early stages of the second half of this credit cycle,” Whitney wrote. “I expect another $1.5 trillion of credit-card lines to be removed from the system by the end of 2010.”