FOR several years now, businessmen and politicians in New England have muttered the words "credit crunch" more often and with greater bitterness than in any other part of the country.
After fueling rapid growth in the region during the 1980s, bank lending dried up in 1990 as many real estate loans went bad. Now there are signs that banks are recovering to the point where they can lend more freely again.
This week, the Bank of Boston Corporation announced a "credit launch" that aims to make $3 billion in loans to New England businesses.
Gerard Cassidy, a bank analyst with the investment house Tucker Anthony, says that the announcement reflects the "greater confidence bankers have that the economy is bottoming out and will start to grow" in the next year.
Massachusetts, Connecticut, Rhode Island, and New Hampshire are still near the bottom of a 50-state ranking of job growth. But, except for Connecticut, the New England states have all been moving higher over the last year. Vermont and Maine reached a break-even point in February, showing no net loss of jobs.
"Certainly the free fall has ended," says Wayne Ayers, chief economist at the Bank of Boston. But the recovery will be a slow one, he says. Connecticut has yet to feel the full brunt of defense-industry cutbacks.
Although he agrees that the recovery is moving at a "paltry rate," John Gould, president of the Associated Industries of Massachusetts (AIM), says that "there will be a lot of demand" for new loans. "There is no question in my mind that this economy wants to grow again."
Mr. Gould notes that recent surveys of AIM's 3,100 member businesses suggest that orders for goods will be picking up in six months. Also, consumer confidence in New England has been edging closer to the national average - and both indexes are rising.
Thus, the fresh credit is coming at an appropriate time, he says.
New England's major banks - Bank of Boston, Shawmut National Corporation, and Fleet Financial Group - recently joined in a $120 million deal to finance construction of a new Boston Garden. The building is home to the Celtics basketball team and hosts other events.
"I think a year from now we'll all look back at the Boston Garden announcement and the Bank of Boston announcement as the inflection point" at which banks shifted from tight lending policies to making loans again, Mr. Cassidy says. Regional situation
Although banks across the country toughened lending standards during the recession, the credit crunch "was really a New England phenomenon," says William Dunkelberg, economist for the National Federation of Independent Business.
The organization represents the nation's small businesses - the ones that depend most heavily on banks for their credit needs.
New England banks "got really carried away" with lending for commercial and residential real estate, Mr. Dunkelberg says. Many of those projects failed, with devastating consequences for banks.
Gould says the credit crunch made New England's recession much more severe than it otherwise would have been.
Now banks appear to be ready for "business as usual" again, Dunkelberg says. The more aggressive lending by the Bank of Boston is likely to be matched in some degree by competing banks, says James Howell, president of the Howell Group, a Boston economic consulting firm.
If the bank lends all $3 billion over the next couple of years, as it hopes, this will create an estimated 30,000 to 50,000 new jobs. The bank initiated $800 million in loans last year.
But Mr. Howell notes that 50,000 jobs represent only 1 percent of New England's employment. And he predicts that the financial services sector itself will shed 50,000 jobs in New England over the next two or three years as the industry downsizes.
Fleet has already cut 3,000 jobs at the former Bank of New England, which it acquired early in 1991. Last year, the number of New England banks dropped 14 percent, from 258 to 221, according to Sheshunoff Information Services Inc. Capital base rebuilt
In announcing the lending push Monday, Bank of Boston chairman Ira Stepanian acknowledged that the region's banks had "turned inward" in recent years to deal with their own problems.
"That's all behind us now, and we are well into our recovery stage," he said.
The bank recently announced its third straight quarterly profit, and problem assets declined by $236 million - 16 percent - from the previous quarter.
Moreover, a $147 million stock offering in April helped boost the bank's capital-to-asset ratio to a healthy 5.8 percent, versus 4.8 percent a year before. Shawmut has also raised capital by issuing new stock.
To help small businesses tap its resources, the Bank of Boston will:
* Make 25,000 in-person calls on regional businesses, plus 2,500 calls on inner-city businesses, in the next seven months.
* Hold seminars to help businesses learn about credit standards, which have changed over the last few years.
* Offer a toll-free number for businesses interested in loans.