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<< Previous   of   Next >>   ADVERTISEMENT   Related Stories • Will the bailout help? 10/4/08   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Saturday, October 4, 2008 Nation still gripped by credit crunch Associated Press NEW YORK -- The stranglehold on the credit markets remained tight Friday after the House approved a revised $700 billion financial bailout, with investors nervous that the plan is at most a first step in repairing the faltering U.S. economy. Anxiety among investors kept Treasury bill demand high; the yield on the 3-month bill slipped below half a percent. Most market participants have regarded the rescue plan approved by the Senate earlier this week as a medicine for what's ailing the financial system, but not a cure-all. "At best, we can hope that it stems some of the more intense risk from the credit crisis. It prevents things from spiraling out of hand here," said JPMorgan Chase economist Michael Feroli. Some are worried the plan won't work at all. "Nobody knows how it's going to succeed," said Howard Simons, strategist with Bianco Research in Chicago. "It seems the American public had better sense than Wall Street and Washington; the American public said, don't throw good money after bad." The Treasury will buy banks' risky mortgage-backed assets in an effort to alleviate investors' worries about the institutions' solvency and free them up to do more lending. But even if those efforts succeed, the effects will be far from instantaneous. And borrowing could remain very expensive for some time. With the economy in such a weak state, lending to consumers and businesses will still appear risky until certain factors -- particularly employment and the housing market -- improve. The Labor Department said employers cut payrolls by 159,000 in September, the largest loss in more than five years, while unemployment remained at 6.1 percent. Layoffs are likely to keep piling up if it remains tough to find credit. Spectrum Yarns Inc., a North Carolina textile company, said it closed two plants and laid off 200 workers this week because it got turned down by a North Carolina bank, a New York finance company, and several private lenders. It's also going to get even harder for individuals to get home loans. Banks have become more stringent in their mortgage underwriting, and Wisconsin's affordable-housing agency recently suspended making loans for single-family homes because it was unable to sell tax-exempt mortgage revenue bonds and raise capital. READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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