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Consumer Credit Slightly Higher After Major Prior Downward Revision, Commercial Banks Withdraw $6 Billion In Credit
April consumer credit came in slightly above expectations, at $2,423 billion in April, compared to $2,421.8 billion in March. The March number was interesting as it was revised notably lower from +$2 billion to -$5.4 billion, a revision the likes of which we can probably expect for April once next month's data is released. The April improvement was entirely due to non-revolving consumer credit, as revolving credit declined once again, this time from $835.7 to $829.4 billion. Non-revolving credit increased $1,586.1 to $1,593.6 billion. In terms of MoM changes to key credit holders, the bulk of credit increase came at the Pools of Securitized Assets, which increased credit holdings by $3.9 billion, while Commercial Banks reduced the most of their existing consumer credit. Alas, we don't see how the latter is in any way conducive to reflating the economy if the primary source of consumer credit continues to contract lending.
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You can probably trace a straight line between new car "sales" at GM and Chrysler and financed under 36-month leases and the growth in the pool of securitized assets.
BTW, in order to make the lease payments "affordable" the lessor (the old GMAC), had to assume overly aggressive residual values on the cars which, either when the cars are repossessed or when the cars are returned, represent yet another wonderful contingent liability on the balance sheet of the Federal government.
Very interesting observation. It certainly would explain the big auto sales numbers. They have been doing "sub prime lending" once again to juice the books. What's the definition of insanity.........?
http://www.zerohedge.com/article/welcome-insane-asylum-or-how-we-learned...
I doubt that things have changed (much) since the "good old days" when I worked at GM, but to subsidize the low interest rates, the manufacturing division paid a cash lump sum to the financing division at the time the car was sold. They did this because the mismanagers at GM got profit-sharing based on corporation-wide profits, while the rank-and-file at GM got "profit sharing" based on manufacturing division profits. So the maneuvering to low! low! low! interest rates was more of a "screw yer own worker" (including the white-collar workers, of which I was one) move than it was "let's motivate buyers" move. The low interest rate deals keep getting repeated over the years because it also happens to be a pretty decent move to motivate buyers to come in the dealerships' doors - but that is just icing on the cake.
Nice of the Federal Government to add $2 billion in non-revolving to the bottom line also...
With states under increasing budget pressures they are forced to increase fees/tuition for state-run colleges, which leads to higher student loans...
Good to know that the buyer of last resort, the FRB, is keeping the wheels of modern finance properly greased. Unfortunately, the analogy is completed by a well-lubed chasis flying off of a steep cliff. Crash and burn.
These kind of revisions worked for housing...
It's all mortgages prior to the tax rebate deadline. Mr Consumer aint using their credit cards.
Today's Shadowstats was particularly interesting and discusses this.
Nice in view of the 600,000 auto recall by Chrysler today. Gotta keep everyone busy. Now spare parts (bailed out).
I think the numbers placed a banana peel right under the market at 3. It's the I Call BS Market. After the Friday NFP, everyone's a wise ass, rose colored glasses sittin with the trash and don't take candy from strangers and beware of Greeks baring austerity packages.
Dr. Frank Poole: [playing chess with HAL, Poole studies the chessboard] Let's see, king... anyway, Queen takes Pawn. Okay?
HAL: Bishop takes Knight's Pawn.
Dr. Frank Poole: Huh, lousy move. Um, Rook to King 1.
HAL: I'm sorry, Frank, I think you missed it. Queen to Bishop 3, Bishop takes Queen, Knight takes Bishop. Mate.
Dr. Frank Poole: Huh. Yeah, it looks like you're right. I resign.
HAL: Thank you for a very enjoyable game.
Dr. Frank Poole: Yeah, thank you.
"the bulk of credit increase came at the Pools of Securitized Assets"
Was this effect due to FASB 166?
Assuming it is, we've basically seen a pretty strong decline in consumer credit for April.
The collapse of revolving consumer credit - credit cards - is unprecedented, now down 15 of 16 months since January 2009. Peak was Dec 2008 at $989 billion NSA, and RCC was growing at 5.5% CAGR up to that point in the 2000s (+11.0% CAGR since 1980).
Two-thirds of this decline, $160 billion, has been bank charge offs, not voluntary debt paydowns.
But wait, there's more...RCC in April at $829 billion NSA, now down $237 billion from where it would have been had growth continued at 5.5% CAGR.
That's more than 2.0% of the Consumption segment, that +70% portion of US GDP, and mighty deflationary.
People aren't spending and why should they. I really believe people are beginning to realize that we don't need half the shit they are trying to shove down our throats. Little Timmy got a jackbooted kick in the ass from Fraulein Merkel at the G20. She also cancelled the meeting with Sarkozy. France is about to go down. Might be time to start scoping out some property in the wine district, unless property in Italy is preferrable.
I wish I could misplace $7.4 billion and not be too worried about it.