Bailout for Wall Street, Credit Problems on Main Street

Are small businesses having trouble getting credit already?

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Last week, I mentioned that it's still far from clear just how much this financial crisis is really causing credit sources to dry up. Evidence on the state of the credit crunch after all this turmoil will slowly be filtering in, and here's one of the first tidbits. Today, the new Discover Small Business Watch poll for the month of September shows that the conventional wisdom might be right after all when it comes to small businesses.

One key finding:

Of small businesses who have attempted to get loans, 72 percent say it is harder to borrow money right now.

I should note that this poll was conducted roughly from September 9 to 16—before most of the recent failures on Wall Street. So the situation is very likely worse than the poll lets on. The number of businesses actually seeking credit—33 percent—is modest.

On the one hand, this makes the need for a bailout look more pressing. Even a short amount of time when businesses are not able to borrow can have huge consequences for economic growth as businesses cut back in other ways. On the other hand, it's a reminder that the real threat the financial crisis poses to the U.S. economy is not the problems for the financial institutions themselves—it's what happens to Main Street when financial intermediaries fail. It's not entirely clear that the bailout will trickle down to benefit the core of our economy.