Mar. 8--The credit markets nearly collapsed by September.

Congress passed a $700 billion bailout in October intended to re-start the flow of money.

Local banks began getting millions of dollars by December, with orders from the government to keep lending. With loans would come spending, and with spending would come jobs.

But now it's March. The economy sputters and jobs disappear at a pace not seen in decades.

What's going on?

Many in the public and in Congress have blamed the banks for not lending.

Locally operating banks say they loaned money at record rates in 2008 despite the meltdown.

But because of the deepening recession, even borrowers with good credit scores and previously stable incomes are not expected to want to take on a lot more debt.

And banks say they won't lower their standards, because lending to people who couldn't realistically pay money back caused the current crisis.

Brian Davis, assistant professor of management at York College, has tracked the financial collapse and bailouts since the beginning.

He said some consumers continue to have trouble getting loans for various reasons, and banks need to find ways around some issues.

But the first big bailout last fall appears to have been "one step behind where the problem is," Davis said. "That's not really the issue anymore."

The new problem is unemployment and the

overall economy. People began to lose their jobs because of the credit crunch around the same time banks got government money to help solve the problem.

Many companies, dependent on a constant stream of loans and debt agreements, ran low on money when the crunch was at its worst. They began cutting workforce and spending to make up the difference.

So, many bank customers who wanted and needed loans last fall think it would be irresponsible to take loans now.

They fear for their jobs or their ability to pay back the money, Davis said.

Steve Snell, executive director of the Realtors Association of York and Adams counties, said local realtors are seeing the problem. The bottom line, he said, is that most people with decent credit can still get a mortgage. They just aren't taking banks up on it.

Davis said the gap between loan customers and banks is similar to today's fundamental housing market problem. Buyers expect a low price if they take a risk and buy in this economy, and sellers sit on their properties if the offer isn't on their terms.

"And somebody's gotta bend," he said, or nothing will change.

In the face of those problems, some local banks are trying different strategies to get money out the door.

Secondary problem

Fulton Financial Corp., parent company of Fulton Bank, has acknowledged the public wants to know how federal dollars are getting to the local community.

In a news release dated Feb. 26, the company tried to explain why it can't say specifically what it is doing with the government money.

The perceived lack of transparency has drawn criticism, including from U.S. Rep. Todd Platts, R-York County. He voted against the bailout last year and continues to say it was a bad idea because of transparency and because there was little guarantee the policies would work as intended.

Fulton's answer is that government loan money gets mixed into all money available for loans, so it can't be tracked dollar-for-dollar.

But from its overall loan pot, Fulton said, it is creating five new lending programs specifically for people who used to get loans through what Fulton calls the "secondary markets" and now can't.

The secondary markets were what sputtered and started the credit crunch in the first place.

Under the system, investors would buy the rights to get paid a person's mortgage or loan payment from banks, then "bundle" the person's mortgage with other similar mortgages and sell the bundles to investors.

The money raised by banks or other mortgage lenders by selling the payment rights created a larger pool of money, allowing banks to make more loans.

The system nearly collapsed when homebuyers, who bought houses they realized they couldn't afford, started defaulting on their mortgages.

Financial entities that dealt with riskier loans -- those that required a lower credit score and smaller down payments, with payments growing over time -- were the hardest hit.

Many are no longer in business. The government saved the two biggest investment firms, government-sponsored Fannie Mae and Freddie Mac, which purchased and bundled mortgages. However, the market is badly damaged, and the secondary markets for some loans that Fulton called "non-conforming" have all but disappeared.