BSU economist's prediction

BOISE -- The credit crunch is being felt globally and Boise, Idaho is no exception.

An economist at Boise State University says the effects will be felt for a long time to come.

"One of the things that got us into trouble was how easy it was to get credit and as a result too much credit was extended," said Dr. Don Holley.

Don Holley is the chair for the Economics Department at Boise State University. He says now that the bailout has been approved it should give financial institutions more flexibility when it comes to issuing credit and giving loans. But Holley doesn't expect that to happen anytime soon with such a risky economy.

"When things become risky people want to hold on to less risky assets and the less risky asset is money," said Holley.

Holley says risky times cause people to withdraw money from banks and other financial institutions, and banks are forced to protect themselves by holding on to cash and not lending.

He says the bailout is supposed to restore confidence back into lending, but it's hard to forecast what's going happen with it.

"One way economists forecast is they say, ‘how did the economy respond the last time we were in this kind of situation?’ And we look back and we don't find anything comparable. This is different," said Holley.

One thing Holley is confident about is getting a home loan or even an auto loan will be a much more in-depth process than in years past.

"You’re not going to able to say, ‘'I'm a good looking guy give me a loan!'  You’re going to have prove you can pay it back. So there's going to be more restrictions on loans, more regulations on loans," said Holley.

Holley says that Congress may even put restrictions on what banks can or can't do.

"These are critical times. This is not your run of the mill recession that we're facing. This is serious stuff," said Holley.

Now that the bailout package has been approved, the next step for Congress is to choose an administrator and then select a staff.  Once that has been established, then policies and procedures will be defined.

Holley says the process could take months.