Credit Shortage Worse, House Panel Is Told

A year after the Bush Administration took steps to ease the credit shortage, businesses and bankers said Tuesday that the problem has become worse, not better, and threatens the economic recovery.

“This is not a credit crunch but a credit crisis,” Ralph Hadley, a Florida lawyer who has sat on bank boards and represents builders, developers and businesses, told the House Banking Committee’s general oversight panel.

Max Pearson, a car dealer in Richmond, Va., had his 6-year-old business loan called even though he has never missed a payment, never had a late charge and has 40% equity in the building, Hadley said.

A desperate Chicago jeweler placed an advertisement in the Wall Street Journal entitled “To Any Bank . . . HELP,” after he had his loan application rejected 11 times, said Rep. Carroll Hubbard (D-Ky.), chairman of the subcommittee.

A solid business wants a loan for a Chinese noodle-making machine. But Robert Hawkins, chairman of Southern Commercial Bank in St. Louis, Mo., said federal regulations are making it hard for him to justify extending the credit.

These were among the litany of complaints from bankers and businesses testifying before the panel on the credit crunch.