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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Survey: Businesses Already Cutting Back

Late last week, the Association for Financial Professionals released a survey from its members over the past two weeks that shows businesses already are reducing spending, freezing hiring and considering layoffs in the face of the current crisis. The study was little-noticed when it came out but now is gaining traction.

Who are these people and why should you care?

The association is made up of the top financial and treasury officers of medium-sized and big companies. In other words, the people who hold the purse strings for big employers.

Board members of the association include top officers from companies such as Target, Tiffany, Wackenhut and Hallmark.

It's important to note that this is only one survey.

Nevertheless, you should care because these people are telling you that they are already so concerned that their businesses can't get credit -- loans -- that even a few weeks into this current manifestation of the crisis, they're considering draconian contractions, including layoffs. Certainly, they're already cutting spending.

Nearly 40 percent of businesses surveyed said they are having trouble getting access to short-term credit, the survey says.

So far in the current financial crisis, the emphasis has largely been focused on the political maneuverings, this being Washington, and the impact on the stock market, which affects real people.

Both are understandable. Capitol Hill either will or won't come up with some version of the $700 billion Wall Street rescue plan. As for the stock market, that makes sense too. Most people have money invested directly in Wall Street, either through their 401(k)s or stocks they've purchased, or indirectly, through pension plans they depend on that have invested their contributions in Wall Street.

But a larger concern -- one that could have serious, long-term, job-losing, business-closing consequences, many fear -- is the credit crisis. Lawmakers have been warning that if some form of rescue bill isn't passed soon, you -- Joe Consumer -- won't be able to get a car loan, for instance, at least not a rates you can afford.

It may be understandable to say, "Too bad. Too much credit got us into this mess." And, to an extent, that's true. And consumers may think, "Okay, if I have to drive my old car for another year instead of getting a loan to buy a new one, so be it."

But every day, every business in America depends on credit for a thousand different reasons: buying merchandise, meeting payroll, paying for shipping and distribution, buying advertising. Everything a business does to stay in business and keep paying its employees. Businesses do not operate on a cash-only basis.

And if businesses cannot get credit to keep growing, they have to make cuts to stay in business, or they will go out of business. And take their employees with them.

-- Frank Ahrens

By Frank Ahrens  |  September 30, 2008; 11:16 AM ET
Categories:  The Ticker  
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"You should care because these people are telling you that they are already so concerned that their businesses can't get credit -- loans -- that even a few weeks into this crisis, they're considering draconian contractions, including layoffs."

Dewd, Frank... the credit crisis has been unfolding since last summer. For example, the run on Northern Rock took place on SEP14, 2007. Get with the program.

Posted by: Bert in RI | September 30, 1908 11:55 AM | Report abuse

A message from Main Street: I sell ads to car dealers in a major market. Car dealers cannot get loans for most buyers, so they have been cutting back on expenses for the past few weeks. I have been doing this for many years, so I have seen ups and downs, but this environment is unsustainable.

Posted by: Ray | September 30, 1908 12:09 PM | Report abuse

Dear Bert in RI:

It's a good point you make. I'll modify the posting. Thanks.

Posted by: Frank Ahrens | September 30, 1908 12:32 PM | Report abuse

Yesterday I was driving down a major street with a mall and more than a few big box retailers. I was wondering how may of the businesses would have to close down in the next year or two and planning on ways that I could economize if our business slowed down.
It's been a long time since we saw a real hard recession--to my mind back in the early to middle 1980s. If recession hits the way it looks we'll be back in the situation that I remember from those times and the the biggest effects will be felt by those who are simple or wilfully ignorant--the defeat of the bailout yesterday can be directly layed at the feet of the 'it's not my fault' crowd. Hopefully we'll find a way to work together, but from where I'm standing the stupid and the selfish are going to drive us further into the ground than the we need to be sent.

Posted by: Thomas Fiore | September 30, 1908 1:51 PM | Report abuse

John McCain Is NOT An Economic Reformer. He Did NOT Sponsor A Bill To Reform Freddie Mac / Fannie Mae! These Are Lies.

Three and a half years ago, John McCain belatedly cosponsored an apparently "dead" bill on mortgage regulation. He then did nothing else to revive it or bring it back up for consideration.

S.190 - A bill to address the regulation of secondary mortgage market enterprises, and for other purposes.
Sponsor: Sen Hagel, Chuck [NE] (introduced 1/26/2005)
Latest Major Action: 7/28/2005 Senate committee/subcommittee actions. Status: Committee on Banking, Housing, and Urban Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.
Sen Dole, Elizabeth [NC] - 1/26/2005
Sen Sununu, John E. [NH] - 1/26/2005
...time passes...
7/28/2005 (the date of this bill's LAST activity)
Sen McCain, John [AZ] - 5/25/2006

10 MONTHS after anyone had looked at this bill, McCain blew the dust off it and cosponsored it. He didn't do anything to push it forward, and the bill never saw any more activity in the Senate.

That seems to demonstrate a serious lack of leadership. It also continues the pattern of McCain stretching the truth, distorting the facts and outright lying to get elected. "Journalists" need to do their jobs here. Explode this MYTH. McCain has stood for deregulation. His has not been a reformer on the economy. His tax cut for the rich is more of the same.


Posted by: underdog | October 1, 1908 1:56 AM | Report abuse

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