Credit Conditions

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.