The Fed survey shows...
The weather outside is frightful, but the chill in the banking sector is even worse. While the Fed is busily pumping money into banks, banks are eagerly battening down the hatches and locking that money up safe and sound instead of LENDING IT! Who does that help, anyway? Banks are more willing to trade with each other, or so LIBOR tells us. But lend to a nonbanks? A Consumer? A business? FUGGEETTABOUDDIT!! Obviously that attitude will weight heavy on growth.
BANKS LENDING PRACTICES -Banks of all sizes are tightening their standards for lending and the spreads at which they lend. Both measures are up nearly across the board, by a percentage that closes in on 100% of the respondents compared to a peaking at about 60% of them for large and medium size banks last cycle (2001) and near 40% for small banks in the last cycle. This cycle is much worse for all types of lenders.
COMMERCIAL REAL ESTATE: The percentage of lenders tightening is up to 87% in this cycle compared to past peaks in the last two cycles at around 70% and 45%. Again in this cycle the tightening has gone further and demand has fallen of with ‘increased demand’ seen by -55% in this cycle compared to a low of -51% in 2001.
LENDING BY TYPE OF LENDER/MORTGAGE: Standards are tightening across all types of mortgages, Price Subprime and non-traditional and demand is falling across all of them as well.
CONSUMER LOANS: There is less willingness by banks to lend and less demand by consumers to borrow – both worse than in either of the past two cycles. Standards on credit card loans and other consumer loans have been tightened by 58% to 64% of respondents. These figures compared to a past cycle peak of 20% that tightened up, but 1996-97 50% of respondents tightened standards on credit cards and about 25% tightened on other loans. Increases in the tightness in this cycle seems much greater than in the past. At least standards for credit cards and other loans did not tighten beyond the levels of last quarter.