Thursday, November 06, 2008

What Credit Crisis?

According to the most recent weekly banking data from the Federal Reserve, the Total Bank Credit of All Commercial Banks exceeded $10 trillion for the first time during the week of October 22 (see chart above, click to enlarge). Compared to mid-October 2007, total bank credit in October 2008 increased by almost 11%, and is almost $1 trillion higher ($977 billion). Compared to mid-2000, total bank credit has doubled from $5 trillion to $10 trillion.

6 Comments:

At 11/06/2008 9:49 AM, Anonymous rvturnage said...

One could argue that the leveling off in 08 was their justification for worrying about a credit freeze...Until you look at the end of 2003 and it appears that a similar leveling off occurred then, yet I don't recall people screaming about credit being "locked up" or frozen.

 
At 11/06/2008 9:53 AM, Anonymous jorod said...

On a different subject, Mark is always talking about how much the oil companies pay in taxes. You might also mention howmany people they employ. ExxonMObil alone employs over 80,000 people.

 
At 11/06/2008 10:08 AM, Blogger bob wright said...

jord,

In a similar vein, I've always wondered how many people will be thrown out of work if Michigan pols succeed in curtailing the business of landfills in Michigan through a prohibition on Candian trash.

How many truck drivers, diesel mechanics, bull dozer drivers, etc. will lose their jobs because Michigan politicians make their business illegal.

 
At 11/06/2008 10:53 AM, Blogger matt said...

I had the same comments last time you posted this graph. The way you say "what credit crisis?" is, in my opinion, outrageous. Doesn't the L-shaped behavior of the graph in '08 imply that SOMETHING is or at least was amiss? It seems you're picking facts and ignoring those that don't support your preconceived notions.

If you want to look for data supporting a return to normalcy, look at the fact that the TED Spread is normalizing again. The sharp spike indicates there WAS a credit crisis but we are looking at a return to credit health.

It is obvious to me from your own data and the Ted Spread that we had some sort of major credit upheaval and, hopefully, the bailout and the central bank actions to improve liquidity have and will stem the crisis.

And, just to post a devil's advocate, this guy argues the central bank actions and bailouts will make it worse.

 
At 11/06/2008 11:01 AM, Blogger spencer said...

You are looking at the wrong side of the bank's balance sheet. The point that bank lending is growing does not show that there is no crises.
Rather, it shows that the Fed actions to offset the collapse of bank financing in the money market has worked very well.

 
At 11/06/2008 11:53 AM, Anonymous rvturnage said...

matt, there's a similar leveling off in 03, yet no complaints (that I remember) of frozen credit. The growth after the leveling off is more even, but then the government wasn't directly injecting capital by buying stock in banks, either.

As for the TED Spread, there's been spikes before. Notably in 1987, and in the early 90's. Yet I don't recall socializing banks because no one could get credit. Actually, I seem to remember pretty easily getting loans in the early 90's. We have no idea whether or not the TED Spread would have smoothed out once the bad investments had been cleaned out by the market correction, though, because the Fed's refused to let the market work.

What Prof. Perry's information shows is that contrary to MSM reporting, most banks are having no problems loaning money and every day citizens CAN get a loan. Money is flowing and will continue to do so to credit-worthy borrowers. As it should be.

 

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