Neel Kashkari, the Minneapolis Federal Reserve Bank President, and former Assistant Secretary of the Treasury during the 2008 bank crash and aftermath, appeared on CBS News “Face the Nation” on March 26, where he said that in the U.S. economy, “capital markets have been closed for the past two weeks"; that is, banks have been unable or unwilling to buy corporate bonds or make significant corporate loans. Thus he described a further development of lending “stress” in the banking system beyond the Federal Reserve’s survey of bank loan officers published March 10, which found that 50% more of them were constricting credit, than were expanding or maintaining it.
Kashkari then went into Fed doublespeak regarding a “credit crunch” hitting the entire economy. “[W]hat’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. And then that credit crunch, you’re right, just as you said, would then slow down the economy. … If those capital markets remain closed, because borrowers and lenders remain nervous, then that would tell me okay, this is probably going to have a bigger impact on the economy.” (https://www.cbsnews.com/news/neel-kashkari-face-the-nation-transcript-03-26-2023/)
That tautology being as far as Kashari was willing to be drawn, the ForexLive website, in reporting on his statements, explained that a credit crunch “occurs when banks and other lenders become reluctant, or unable, to lend money to borrowers, even those who have good credit histories; this can cause a sharp contraction in economic activity.”
