Is the Credit Crunch a Big Lie?

A short research paper from three economists from the Federal Reserve of Minneapolis find that the so-called credit crunch, which led to the bailout, was based on a number of false claims (HT: Marginal Revolution).

1. Bank lending to nonfinancial corporations and individuals has declined sharply.
2. Interbank lending is essentially nonexistent.
3. Commercial paper issuance by nonfinancial corporations has declined sharply and rates have risen to unprecedented levels.
4. Banks play a large role in channeling funds from savers to borrowers.

Here we examine these claims using data from the Federal Reserve Board. At least based on data up until October 8, 2008, we argue that all four claims are false. [emphasis added]

Meanwhile, the Club for Growth notes that the moral hazard from government intervention has already begun – i.e. people not paying their mortgages, because they are certain the government will intervene to prevent anything bad from happening to them.