Aug. 2--Many people might not remember this, but the credit crunch started in the summer of 2007.

The credit crisis, which some say began in July-August '07, might have been easily forgotten if things turned out to be as manageable as some economists predicted.

But everything unraveled into a financial panic last September -- a panic that turned so ugly that Washington eventually agreed to bailouts for banks as well as automakers.

Now, things are on the mend.

"Even though we're not in a freefall crisis mode, we're still in a crunch," said Diane Swonk, chief economist for Mesirow Financial in Chicago.

Martin Baily, senior fellow for the Brookings Institution, said chances are good that the worst is over for the credit crunch.

Other economists agree that credit has gradually become more available. Swonk noted that credit markets have improved significantly since the near-collapse in the wake of Lehman's failure last fall.

Better, though, is nothing like the easy credit of years past.

Debt dropped in quarter

New numbers, due out in a month or so, are expected to reflect that bankers continue to be reluctant to lend and illustrate that many consumers and business owners want to pay down debt, not take on new loans during this recession.

Growth in household and nonfinancial corporate debt outstanding actually fell in the second quarter of 2009 -- the first time on record since the data go back to the early 1950s, according to Moody's Economy.com's estimates.

In the second quarter of 2009, debt for households and nonfinancial corporations fell year-over-year by an estimated 1.3% or $276 billion, according to Moody's Economy.com. The outstanding debt was $20.6 trillion.

Outstanding debt is the total debt owed by households and nonfinancial corporations.

By contrast, in the second quarter of 2006, the growth for household debt and nonfinancial corporate debt increased by 10.5% year-over-year or by $1.725 trillion. The outstanding debt for these two groups was $18.12 trillion.

Loan portfolios at major banks are tumbling.

Most of the loans that are being created aren't new debt, instead, most involve refinancing existing mortgages or extending existing credit, not creating new loans.

One reason is that consumers are hesitant about taking on new debt.

"They're not buying houses. They're not buying cars. They're not buying much of anything unless they absolutely have to," said Dana Johnson, chief economist for Comerica.

Comerica saw its total portfolio shrink about 4% to $46.6 billion in the second quarter.