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Fed Reports Increased Easing In Credit Conditions... And Nobody Cares, As Credit Demand Is Non-Existent
Today, the Fed released the October 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices: a survey which tracks the eagerness of banks to lend. Not surprisingly, now that the treasury curve carry trade is over, and trading volume are non-existent, banks are once again willing to give money to anything that can walk and breathe at the same time, with various exceptions, in an attempt at a wholesale rekindling of the credit bubble. "The October survey indicated that, on net, banks eased standards and terms
over the previous three months on some categories of loans to households and
businesses.2 Both large and other domestic banks reported
having eased some standards and terms; large banks were primarily responsible
for the easing reported in July.3 However, substantial fractions of banks reported
in response to a set of special questions that standards for many categories of
loans would not return to their longer-run averages for the foreseeable
future." In other words, banks handed out free money... and nobody came. The consumer no longer cares about incremental leverage.
Below is Goldman's take on the announcement:
1. According the Fed's latest Senior Loan Officer Survey, banks’ lending standards—especially at large banks—continued to ease for most loan types over the past few months. However, lots of banks still expect loan standards to remain tighter than long-term averages “for the foreseeable future.” Loan officers reported the most easing for C&I loans, followed by consumer loans. (Mortgage lending standards, however, showed a slight net tightening.) The most common reasons for the easing in standards were “more favorable or less uncertain economic outlook” and more competition.
2. The loan demand side saw a net decline, especially for small firms. Weaker C&I demand was due to reduced financing needs for inventories, reduced investment spending, and increases in internally generated funds. But “in a sign that demand might pick up, the number of inquiries regarding new or increased lines of credit continued to rise.”
As for the reason why the supply side of credit is irrelevant, and it is a question of demand, demand, demand, in an alternative study full of pretty pictures, the New York Fed released its quarterly report on household debt and credit which showed continued decline in consumer debt, as Americans, more than anything, want to be rid of indebtedness, as the outlook for the economy could not possibly be more uncertain. In an environment in which the sole source of any growth, and prevalent flat-lining, has been the fiscal stimulus and the Fed's monetary policy, with little if anything arising organically, consumers are once again the best and final arbiter on just how well the recovery is progressing.
And for everyone who wants to see the complete Nre York Fed presentation with lots of pretty charts confirming that there is no growth in the only important metric - credit - can be found here.
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Bernanke is chickenshit. He said he'd bring out the helicopters, but there's not a whirlybird in the sky.
http://removebernanke.org
Here is why credit demand is non-existent:
Synopsis: Gold Is Not Money
It doesn't matter if folks don't run up debt. The gubmint will kindly do it on their behalf.
That's what most clowns on bubble vision don't understand. It's not about worries that "banks are not lending". This is a demand problem. People are shell-shocked from a generation-long borrowing binge. Even record low interest rates will get these people and companies to take out more loans again.
I'll probably take out a new mortgage soon, but it will be to extinguish a larger one :)
Some of us are deleveraging the "normal" way.
Plus
1) Wages are declining.
2) High unemployment/underemployment makes people defensive.
3) What's that? RE doesn't always go up?
IMHO, its going to be a long, long time and a lot of de-leveraging before lending demand picks up again.
Tyler, you need to read between the lines in the bank loan adds.
You can get the money. Increase your debt (untill debt ceiling) (1/3 downpayment of your salary)
BUT
you can't join existing loans.
Now this has implications to people who are drowning in debt because in this way they can't lower their payments.
Fed reported they weren't trying to stoke inflation.
Fed reported that they weren't trying to pressure the dollar lower.
Fed reported they weren't monetizing the debt.
Fed reported they were open and honest in all dealings.
Fed reported that they did not have records of funds distributed to TARP recipients and AIG Swap Counter-parties.
Fed reported that they saw no problem with Freidman buying additional Goldman Sachs shares.
Fed reported that Lloyd Blankfield's unicorn's rainbow coloured skittle shits would serve well as backing for new US Currency.
Fed reported that all is well in Whoville.
Fed reported that there was no risk from any assets absorbed from Lehman or Bear Stearns.
Fed reported no outstanding swap lines, hypothication ord dealings for own account or client in Gold Market.
Fed reported got best advice available as to debt financing from primary dealers and largest money managers.
Fed reported gold commode from J. Thain's MLPF&S office has removed from chairman's private loo and sent to Ft. Knox Repository.
Fed reported that Timmy Two Hands would be taking a plane separate from Ben to Korea meeting after Timmah confused G-20 with telly station G-4.
Fed reported a slight Disturbance to the Force.
Fed never reported where all the missing cash went from the transportation and shredding operations.
Fed reported comfortable without external audit.
Fed reported alls well next door to Whoville.
Fed reported great party in Shutter Island... er Heckle and Jekyll Island... oh whatever the fuck... no... Fantasy Fucking Island. Yeah, Fantasy Island. That's it Fantasy Fucking Island.
Fed reportedly left rest of this report to Congress and the American people blank.
lmao
Ben's trying to sell yellow snow cones in Alaska in the winter.
Big Ben still thinks he can push more liquor to people with hangovers the morning after a blowout party. Note to Ben...don't confuse the social drinker with an alcoholic. Two different things.
Anyone on this website who is in business can report that banks are most certainly NOT INTERESTED IN LENDING, certainly not at the small business level (and our business is small to the tune of tens of millions of revenues per year). It is unbelieveable and as near as I can tell it has actually gotten worse lately.
Anyone else care to chime in?
Let me see if I have this straight:
-- We and the banks have no assets, only debt as an asset. And asset deflation is eroding whatever little is left.
-- Individuals and SMB are repudiating debts all over hell.
-- Individuals and SMB are not taking on new debts in replacement of old ones (certainly not the people with current debts, and not anyone else seems like.)
-- The banks hold no hard assets (everything went up in the MBS bonfire) and nobody with any actual wealth wants to do business with them.
-- Velocity of money that was debt-driven is approaching zero. Ben can't get anyone to take out a loan in replacement of imploded debt on the books.
-- The banks are being nuked from the inside, and there is no means to prop them up, because there are no assets that are not themselves imploding, because everything was levered to the moon.
I just cannot get my head around this. I keep coming back to hard assets or the lack thereof. I sense that debt is imploding and dragging a debt-based value system down with it, and nobody can step in with anything solid having real value because everything of value was dismantled and sold to China or India. Were we really that stupid greedy? I guess so.
Werd.
Debtmoney's a bitch. We're living through the tail end of the Misesian crackup boom.
No, "we" weren't that stupid greedy !!! but, WALL ST. & the BIG BANKS WERE ! ......... & TOOK US LITTLE PEOPLE ALONG FOR THE RIDE !
"Increased Easing In Credit Conditions"
Yes they have, and I suspect this debt is being sold to someone with lots of money too burn, the FED? Stupid Investors?
From what I see this all started in late August early September when the markets were heading downward. I figure its the last ditch effort to dig the economy out of a hole so the PTB don't end up with egg on their face.
We all know it won't work. All it will do is buy time. How much time, who knows?????
I tried to help expand the credit ponzi.
I went to borrow 10k cash @ 10% (FUCKERS)
Plan: Buy 8K in PM's use the other 2K to pay the interest on it for the next year.
They told me to fuck off, or give them my car as collateral. F*it I said I did it on my own.
The problem is that repayment of debt is accomplished not by paying interest...it is by repaying principal. If you cannot repay principal, the rate of interest is immaterial and is an arbitrary accumulation that is inconsequental if it is never repaid. This seems to evade people at all levels.
The problem is that repayment of debt is accomplished not by paying interest...it is by repaying principal.
Especially difficult in a deflation
It is not difficult to take on new debt when you dont have any. Yes you have the normal billing etc. But when you are cash only, you dont need banks. Except to clear your paycheck for the month or bi monthly.
We are contemplating about 7 thousand dollars in expenses for the house next year (Basically additional home improvement and repairs) and it will be all cash. No loan needed or wanted.
Basically the Banks like Wells Fargo give you a credit card with a loan at a fixed rate. The catch is you use that credit card once and you instantly go from 8.9% to 29.9 % on all monies outstanding on that card. They dont give out loan loans, they give out a credit card that already has a loan on it and a little higher line of credit to encourage you to spend. We are not stupid. We paid off wells fargo the following day and shredded the cards.
Our FICO score is so damn high I can walk into any dealership and sign for anything at any rate of interest on loan for it. But I wont.
Let the banks starve. As long there is cash to move and spend the following month without using ATM's or debit cards we are good to go.
The only fee that my Credit Union earns is a occasional wire fee for moving a quanity of money across the fed wire to another bank. They do a very good job and have earned a decent wage for thier work this year.
This is all untrue. Bank lending is at a stand still except for credit card offers to those who don't use them and closing of escrow or home loans takes 75-90 days for the MOST qualified borrowers *everyone else including those who rely upon appraisals* need not bother. There is clearly an inability for consumers to obtain real credit while corporations can issue equity, debt and cocos. this really is an ungrateful depression