Tuesday, October 14, 2008

Total Bank Loans and Leases Reach New Record

According to banking data from the Federal Reserve that was updated today, Total Loans and Leases of Commercial Banks in the U.S. continue to grow, and have doubled from $3.5 trillion in 1999 to $7 trillion in 2008. On a monthly basis, Total Bank Loans and Leases exceeded $7 trillion for the first time in September 2008, and reached $7.258 trillion by the first week of October.

We keep hearing news reports that describe U.S. credit markets as being "tight," "frozen," "seized-up," "ultra-tight," "drum tight," etc. Why isn't that much-publicized credit tightness showing up in commercial bank loan data, which keeps setting record highs, and is now more than $7 trillion?


At 10/14/2008 11:46 PM, Blogger bobble said...

"Why isn't that much-publicized credit tightness showing up in commercial bank loan data, which keeps setting record highs, and is now more than $7 trillion?"

it may be an illusion. this is from a posting back in june, 2008.

"Here's the deal. As we all know full well by now, the big boys in the US banking system have been heavily involved in off balance sheet shenanigans for many years now, these shenanigans now coming home to roost in a very big way. You know the vehicles by now - special purposes entities (SPE), structured vehicles (SIV), etc. . . . . . many an off balance sheet "investment" for the banks was funded with asset backed commercial paper. . . asset backed commercial paper has been contracting very meaningfully since the summer of last year. In very rough numbers, contraction to the tune of maybe $225 billion. . . . many a bank has been forced (and will continue to be forced) to take many of these off balance sheet investments/assets back onto their own balance sheets in a formal manner. When this happens, the financing of these assets shows up as a loan. It shows up in the C&I numbers.

. . . Since the end of July 2007, US banking system commercial and industrial loans have expanded by roughly $220 billion. Wow, what a coincidence, right? Wrong. Clearly, this is almost the same amount by which asset backed commercial paper has shrunk. Point being, bank commercial and industrial lending is not strong. It has not expanded meaningfully since last summer to fill the hole left by the contracting asset backed securities markets. To a very large extent, the increase bank C&I lending is simply the banks taking off balance sheet vehicles back onto their reported balance sheets in a formal manner. An illusion of lending strength? In many senses, yes."

At 10/15/2008 5:36 AM, Anonymous Anonymous said...

This is what drives some of us crazy about these statistics. There is another question here too that is not answered in the article that maybe someone can answer and that is where is the data on the "off balance" sheet items before they were brought back on to the balance sheet. If we knew that maybe we could make some sense of the issue. Also, is there a way to find out the make up of the mortgage "crisis". Things like who is not paying, what is the average percent of what they owe, how was the original mortgage obtained, what is the breakdown of the home valuations and the percent of each category, how many are primary residences, how many vacation homes and how many are simply "flippers" that finally someone got stuck with, where are they located (big cities, rural, suburbia, coastal, etc.)

With all the dam computers we have doing everything these days you would think all of this data would be readily available.

At 10/15/2008 6:28 AM, Blogger Chirag Jain said...

Thats an interesting paradox!!
Thanks for identifying that..

At 10/15/2008 2:31 PM, Blogger the buggy professor said...


Many thanks for the Mish global-economic link, a site I visit regularly . . . but whose particular article on the subject you linked to I had forgotten.

It clears up some of the confusion. After all, it's hard to believe that both the Federal Reserve and the Bush-W appointed Secretary of the Treasurry would have started doing what they've done if bank lending had been as high as it seemed on the surface.

Thanks again. And thank you Ralph Short for underscoring the secretive, non-accountable hanky-panky that has been going on with off-balance loans and their nature for years now . . . a counterpart to the entirely unregulated, secretive, totally non-accountable derivative market --- including CDO (collateralized debt obligations), highly leveraged CD (credit "default" swaps), highly leverage fake-insurance schemes as back-ups, and the enormous exposure and vulnerabilities left untouched by the SEC and the FED for years.


Remember, the Republican-appointed head of the SEC between 2003 and 2005, William Donaldson --- who, wrongly, sided with all the SEC Commissions and let investment banks allow their leverage to rise from 10:1 to 30:1 --- did recognize how dangerous the financial system was becoming in 2005.

He wanted to extend regulations to the derivative market. Howls of protest came from the Republican ranks in Congress, and Donaldson was forced to resign.


His successor, Chris Cox --- a former Republican Congressman --- refused to implement even the few regulatory rules that the SEC had over the financial markets, let alone into the entirely non-transparent, non-accountable, global-credit links in the derivative markets.


The result? Cox had to confess last month that he had been wrong: financial markets aren't self-regulating. They should have been regulated much better, he added.

Better late than ever, this mea-culpa?

Si monumentum requis, circumspice


Michael Gordon, AKA the buggy professor

At 10/15/2008 6:40 PM, Anonymous Anonymous said...

Letting ourselves get too bogged down in the intricacies of financial dealings just makes the problems with our monetary system too confusing for most casual viewers of our ongoing financial crisis. The root of the problem is how money is "created" in the first place. Google "Money as Debt Video." Our whole corrupt monetary system is explained in a simple and easy to understand format. But be forewarned, the truth is almost too bizarre to be believed.

At 10/15/2008 7:01 PM, Anonymous Anonymous said...

Buggy Professor, thanks for your comment and I am still trying to find out the makeup of the current crisis. Some of the charts that Mr. Perry shows make sense to me in terms of Fannie Mae and Freddie Mac's lending policies. It is obvious, is it not, that they were involved in a highly leveraged, no reserve, lending scam that ultimately contributed significantly to the current "crisis". I would say it is my understanding also that the Republicans in 2005 were trying to get their arms around it and were in fact sounding warnings but people like Dodd, Frank, Waters and others would not or could not admit to a problem. I saw one video where Raines (head of one of the two quasi government agencies) responded to a republican when asked how he could justify 4% reserves when regular banks were required to have 20%, state in his opinion '2% was all the reserves needed'.

It seems to me we had the usual suspects trying to redistribute wealth but in this case since they could not get a tax increase through they orchestrated a program where the invoice does not appear for years. I guess that would be the same as a credit card co. telling us the new card will carry '0% interest for X period'.

So now, the bill is due, those who pay taxes pick up the tab, and yet none of the lawyers who are in the majority on capitol hill will admit failure.

At least the SEC guy admitted he made a mistake, when will barney, waters, Dodd, Raines, et al do the same.

The answer of course is NEVER!!

At 11/27/2008 7:16 PM, Anonymous Anonymous said...

I also say "google money as debt."

See me on myspace for some others...related.


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