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Recession on the horizon?

A foreclosure sign hangs in front of a home in Miami.

TEXT OF STORY

Scott Jagow: This morning, we'll get a report on how much money Americans are making and spending. People have been using credit to pay for a lot of things, but those loans are starting to dry up. Banks are clamping down because of the problems in the subprime market. So where does that leave us? Marketplace's Steve Tripoli reports.


Steve Tripoli: Wachovia Corporation Chief Economist John Silvia says lending's already grown scarcer for one group:

John Silvia: Especially for consumers trying to get home mortgages, you'd say that the credit definitely is tighter than it was six months ago.

But Silvia says home borrowers may not be the only ones affected if lenders keep tightening up.

Silvia: To the extent that they are losing money in one type of lending, it may impact their ability to lend in other areas. And that again feeds through the entire society.

In other words, there could be less money for consumers and business expansion. Silvia says regulators may tighten lending standards further to clean up the subprime mess.

Silvia: To the extent that they become really aggressive you have maybe a repeat of 1990-1991, which could widen out to a broader recession.

Consumers shouldn't panic — the consensus now is that it won't get that bad. But most economists will also tell you the risk factors for a recession have been piling up.

I'm Steve Tripoli for Marketplace.

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