Transcripts

Credit Market Repairs

SUSIE GHARIB: Now one key to getting the economy back on track is a healthy credit market. For months now, market pros have been saying, fix the credit markets and the financial crisis will soon be over. So are they fixed yet? As Suzanne Pratt reports, experts say we could be seeing a budding comeback.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Spring has sprung in New York City and just as there are finally signs of life on the trees here, metaphorical green shoots have been showing up in the economy, in financial markets and even in the credit markets. Morgan Stanley's Greg Peters says the credit markets are healing but not yet cured.

GREG PETERS, CREDIT STRATEGIST, MORGAN STANLEY: So for the more levered aspects of the credit markets, there's still problems. And then anything mortgage or housing related there are also problems. So, I would say it's operating much better than the fall for sure, but by no means are we out of the woods.

PRATT: We know lenders are operating better today because high quality companies have been able to borrow money to finance operations and do deals. Another frequently cited measure of improving credit markets is the LIBOR rate also known as the London bank to bank lending rate. It has recently been hovering close to a healthier 1 percent. That's a far cry from last fall's almost 5 percent level when banks were fearful of lending even to each other.

PETERS: If banks can't trust each other, then the extension of credit basically seizes up and the flow of funds and the flow of credit also seizes up.

PRATT: Experts say gone is the threat of systemic risk to the credit markets. But the fragile state of the economy still threatens to unwind gains in credit. Others say even though there are signs of a credit defrost, it's critical that the government continues to prop up many areas of lending. As for when it will be business as normal for the credit markets MF Global's Andy Brenner says it could be sooner than you think.

ANDREW BRENNER, CREDIT STRATEGIST, MF GLOBAL: I think by early this fall, we'll pretty much be saying the credit crisis is over. I think that's what Bernanke's been saying the last couple days. Things are still fragile, but we've moved past the worst of it.

PRATT: How will we know that it's really over and the credit markets are totally unclogged? According to one expert, a true sign will be when more leveraged companies also have access to capital. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.