LOC

It seems in the discussions I'm reading of the "crisis", that one of the biggest problems is that credit has run dry. One site asked "how many of you run a small business that relies on a Line Of Credit (LOC) to pay its employees?" Another points out that unless we do something mortgages are just not going to be available.

This leads me to a couple of questions

If you have an existing line of credit, why would this affect you? Can we not pass a simple measure disallowing cancelling of lines of credit unless you default on a payment? And if there is need for extra liquidity for the banks for existing lines of credit let's discuss how we handle that.

As for new mortgages, if the supply of credit is so low compared to the demand, why hasn't the price of credit (that is, the interest rate, right?) increased to meet it? The way that I see it, some of the financial institutions have surreptitiously increased the price by implementing nefarious schemes whereby naive customers end up with a temporary low rate, followed by an enormous rate, at which point the bank either makes a huge profit, or takes over the property. Would it not have been far fairer in the first place to be honest about the true cost of the loan?

I'm not a financial analyst, though I do understand a little about the way that mortgages work --- enough to build my own mortgage calculator, for example, rather than relying on a bank's version. Nonetheless, as a vaguely educated voter, interested in the issues, I'm not convinced that the bailout bill was the right way to go. I'm going to be interested to see what changes they make to it tomorrow when the Senate is scheduled to vote on it: do they bring in more sops to the right, to get Republican support, or do they tilt it to the left to get more Democrats? At the moment, I fear, it's going to be leaning right.

Yours, tilting at windmills,
N.