(TheLibertyRevolution.com)- Jason Furman, the former chairman of President Barack Obama’s Council of Economic Advisors warned last week of a pending credit crunch that will make it harder for small businesses and lower-income individuals from obtaining loans from small or regional banks.
Furman, a professor of economics at Harvard University, appeared on “CNN This Morning” last Thursday where co-host Poppy Harlow asked Furman if Federal Reserve chairman Jerome Powell was correct when he recently said that the US banking system was “sound and resilient” and had “strong capital and liquidity.”
Furman said he would answer Powell’s two assertions separately, noting that people’s money is “absolutely” safe in the bank as up to $250,000 is insured. He said he believes that the Federal Reserve will ensure that every depositor has access to their money.
However, Furman noted that the more important question is whether banks will continue lending and if they do, how much will they be willing to lend.
Furman suggested that banks are likely to lend less than they used to, adding that what the Fed doesn’t know is how big of a credit crunch reduced lending will have on the economy.
Harlow pointed out that when Chairman Powell was on “CNN This Morning” the previous week, he said pulling back on lending “always hurts” smaller companies and “more vulnerable folks.” Only the “big guys” won’t get hurt by it.
Furman agreed, noting that large companies can borrow in the bond market where interest rates have fallen. He said those getting loans from “really big” banks will probably be okay. But for those applying for loans from a regional bank or a smaller bank, while the interest rate posted may look fine, the bank may not be willing to approve a loan at the interest rate posted.