"During the bull market, companies were able to get historically high levels of debt funding. They might have been able to raise five or six times net cash flow," said Bernie Zaia, managing director of Los Angeles-based Barrington Associates, a division of Wells Fargo Securities. "Now they are probably lucky to get a multiple of 3.5 or four."

The big question then is: How long will the lending squeeze last?

As recent as earlier this month, many economists were expecting the home market to turn around and with it the larger economy by some time next year. But after last week's collapse of Bear Stearns and continuing declines in the home market, many are putting a recovery off until 2009.

But not every projection is that pessimistic.

Locally, the UCLA Anderson Forecast, which made its name calling the recession of the early 1990s, is now playing the optimist.

"Corporate balance sheets are very strong. By and large, there is a lot of cash and strong profit flows, and that makes them less needy for new loans," said UCLA economics Professor Edward Leamer and director of the forecast.

"The real economy lives and dies on the basis of real investment, such as building offices and factories, or buying equipment and software. So far we haven't seen corporate spending deteriorate in a way that is consistent with a credit crunch."

Indeed, Wall Street breathed a sigh of relief last week and the markets rebounded when Goldman Sachs and Lehman Bros. released better than expected earnings only to turn south again on renewed worries.

But even Leamer is warning that no one should expect that the economy will return quickly to the strong growth of the past decade. The decline in home equity value is just too great and that's likely to reduce consumer spending for some time to come.

"People are not using their homes as an ATM, and that is definitely a drag going forward," he said.

Nor should anyone expect the easy credit terms of the past several years to return soon. Leamer noted that while the value of residential property nationwide jumped from $5 trillion to $10 trillion over the past five years, the implicit rent increased by a much smaller margin.

"There is at least $3 trillion and maybe even $4 trillion of losses that have to be put on someone's balance sheet," Leamer said. "To the extent that homeowners feel they can walk away from their homes, it is the lenders who will have to absorb the loss."

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