And inevitably, the market is jittery over the possibility that other banks will see big debts go sour. It's not for nothing that the market is worrying. When the economy is flush, as it was so spectacularly until relatively recently, cash is not a hard thing to come by. Everybody is doing well, and there's a feeling that the good times will continue.
Creditors become a little less stringent, and loan growth accelerates.
When the economy begins to contract, these marginal borrowers are the first ones to run into trouble. The Pillowtexes of the world find that they're not taking in enough money to meet their payments. Pillowtex is not the only sign. Junk yields are nearly as much above the benchmark 10-year Treasury as they were in March 1991, the trough of the last recession. Loan growth is slowing.