Is The Fed Fabricating Loan Creation Data?

Tyler Durden's picture

One of the more bullish "fundamental" theses discussed in recent weeks, perhaps as an offset to the documented record collapse in mortgage origination - because without debt creation by commercial banks one can kiss this, or any recovery, goodbye - has been the so-called surge in loans and leases as reported weekly by the Fed in its H.8 statement. Some, such as the chief strategist of retail brokerage Charles Schwab, Liz Ann Sonders, went so far as to note that this is, to her, the "most important chart in the world."

This is indeed notable because as we have shown in the past, for nearly five years, total loans and leases within the US commercial system remained virtually unchanged from a level of about $7.3 trillion, first attained when Lehman filed for bankruptcy. And it doesn't take a PhD in monetary theory to figure out that this lack of credit revival (alongside the historic collapse in shadow bank liabilities) is precisely what the Fed's endless QE programs had been, at least on paper, trying to avert.

Of course, if the data represented by the Fed which supposedly is a sample of call reports distributed to commercial banks, is accurate, then it would be a welcome development to the economy as it would indicate that finally lending conditions are easing, and demand for money is rising at the retail level as opposed to just the institutional (where it is merely used to buy risk assets). In other words, it would slowly allow the elimination of the Fed's artificial conditions and removal of the central-planning umbrella.It would also indicate inflation may finally be returning to the economy (as opposed to just food and energy prices).

And logically, since the Fed's data is sourced by the banks themselves, what the Fed is representing and what the banks report quarterly should be in rough alignment.

Unfortunately it isn't.

Now that the Big 4 commercial banks - JPM, Wells, Bank of America and Citi - have reported their March 31 numbers, we can compile not only what the total amount of outstanding loans was as of the end of Q1, but more importantly, what the change in the quarter was. After all, for Liz Ann Sonders it is this change that is "the most important" data in the world.

What we learn is that the Top 4 banks held some $3.14 trillion in loans and leases at March 31.

So far so good. But what is not so good is that the change of this number in the first quarter is not an increase even remotely comparable to what the Fed makes those who read its H.8 statement believe it is. Quite the opposite.

As the chart below shows, in the first quarter, of the Big 4 banks, only Wells Fargo reported an increase - a tiny $4 billion to be exact - in its loans and leases portfolio. All the other banks... saw a decline in their loans and leases holdings.

We show this on the chart below.

We admit that we have taken a sampling of banks, even if it is the four biggest banks in the US, those which account for 42% of all loans outstanding, and a complete analysis would require complete data from not only regional banks, but also foreign banks operating in the US. However, if the four best capitalized banks, flush with trillions in Fed excess reserves, are indicating on their own that they are nowhere near lending at the level the Fed is telegraphing, and are in fact reducing their loans outstanding, why should the others be more generous in their lending activities?

Which brings us to the question: is the Fed fabricating loan level data?

Or, less dramatically, is the Fed merely once again goalseeking its weekly "data" to account for a world in which deposit expansion is no longer running at the pace seen in pre-taper days. It would be logical that the one "plug" the Fed would adjust to balance off its model is to boost lending activity, which would explain why the Fed is suggesting lending is surging.

Unfortunately, lending is not only not surging, it is contracting, if only among the Big 4 banks in the first quarter.

So whether the Fed has an ulterior motive, or is simply fudging for a lowered Fed reserve creation growth trendline, we believe the people deserve an answer: just what is really going on here?

Source: Fed, BofA, JPM, Wells, Citi

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101 years and counting's picture

to quote some douchebag from the EU:  "When shit gets serious, you have to lie"

max2205's picture

Come on Tyler you have to count Belgium damn it!

Battleaxe's picture

Duh! All Fed data is fabricated.

Pinto Currency's picture


When you have an institution that fabricates trillions of dollars to bail out banks and does not disclose the data, it is easy to believe that they would also fabricate data.

Pegasus Muse's picture

Is The Fed Fabricating Loan Creation Data?

Does a bear ... ?  (you know the rest)

Oh regional Indian's picture

Bear Spanker was in Mumbai two nights ago for one of his $250,000 engagements. 

If I had known, would i have gone and thrown a shoe? For we know what QE did, he know what QE did, Raghu know what Qe's a doin'...

These people either totally believe their schtick and story or are stunningly con-fidant master manipulators...

Get madder, shockign stuff....Oxycodone+++etc. kill more Americans than Heroin and cocaine combined!!!

40 Americans die every day of them...whoa....wonder what is happening here, in unregulatable India?

The pharmacopic stranglehold allows these people to be so confident in their Huxley-side world.

It's mirror being the Orwellian one. It's Chiral actually....


Herd Redirection Committee's picture

Its shocking to me that marijuana use is ostracized, and hydrocodone is... Prescribed by doctors! 

Oh regional Indian's picture

It was a master-stroke eh, HR? What about the confusing word "Drug".

Doctor Drug good.

Dealer drug bad.

What about Doctor.

You sick, doctor good.

Doctor your drink, you may get raped/die.

The madness is  built into the language.

To call Marijuana a drug in and of itself is......meaningless? 

Keyser's picture

Cooking the books seems to the SOP these days... What else is new in the new normal... 

dontgoforit's picture

that 135% is how much more the Fed has 'loaned' to the Treasury to cover the unpayable debts...

boogerbently's picture

I can still hear the bobbing heads calling JPM, "Best in breed" !

TruthInSunshine's picture

This essay is an example (of many) why ZH is a must read.

I would bet $1,000 Yellens that if the level of loan creation at the Big 4
too-big-to-fails (which, as mentioned, account for/hold 42% of all aggregate loans) is flat or declining, there is no possible way that this trend is opposite in at the other banks, and of an additional loan creation amount, to "make-up for" the shortfall, so as to do anything other than prove the Fed is fabricating this data wholesale.

Wait for Conspiracy "Theory" #237 regarding'"official" economic data to be proven as Conspiracy "Fact" in the coming months or year (or so).

Manthong's picture

..f’n rabble rousers and commie libs on this page..

Geez, who ever even think about accusing the sacred guardians of the public purse of creating money or the accounting of money from nothing?

Ham-bone's picture


- Refi's fall 90% +, 40% plus of residential RE transactions are cash only buyers (no loans, no credit)...the only places credit is growing are corporations taking loans to repurchase their own stock, Student loans, and auto loans...

Shocking anyone would beleve something so ludicrous from the Fed...


Manthong's picture

I will gladly pay you tuesday at .000000000000001 interest for a sawbuck today. 

Iam_Silverman's picture

"I can still hear the bobbing heads calling JPM, "Best in breed" !"

No, no, NO!  You heard wrong.  They were being called "The Best Inbreeds".  Banking is incestuous, as we all should know by now.

RafterManFMJ's picture

Good Lord. Take memo: The entire Economy is fabricated and has been since 1973, and arguably, 1913.

Four chan's picture

when all money is confiscated and all currency in circulation is debt what you have is an unsurvivable situation. unless you were the ones confisgating the money.

Manthong's picture

"arguably, 1913."

not arguable :-).. on the "books"

America sold down the river..

to the BMF's (banker Mo Fo's) and their slaves, the pols.

Manthong's picture

oo.. I can think of two things I would like to cofisguate right now..  :-)

fat fingers and typos can sometimes lead to nifty thoughts or horrid market crashes.

Ham-bone's picture




Jan '00 -      '07 -          Dec '13

$1 T  --->  $1.6 T ---> $5.6 T (cumulative "foreign" held US Treasury debt)

25% --->     40% --->    55%  (% of notes / bonds held by "foreigners")

1%  --->      1%  --->     25%  (% Fed held notes / bonds...Fed primarily held Bills until '08)

74% --->     59% --->    20%  (% domestically held notes / bonds)

350% increase                         (public outstanding debt, $3.5 T to $12.4 T)

250% increase                         (intra-gov debt, $2 T to $5 T)

6.6% --->    5%    --->   2.4% (net interest rate on debt)

$300B ->  $270B ---> $223B (net interest paid on national debt)

$9.2 T --> $13.7 T --> $16.1 T (GDP = 75% increase);

$5.7 T -->  $9 T     --> $17.4 T (National debt = 305% increase )

A reversion to the average 50yr yields around 7% would produce Treasury yields with gigantic interest payments, of which nearly half would exit the economy to "foreigners":

Interest payments if yields rose (not to mention the effect on RE or other interest rate sensitive parts of our Ponzi...nor to mention bank IRD's) would look like:

5% blended interest payments = $875 B of which nearly half would likely exit the economy. 

7.5%  = $1.3 T

10% = $1.75 T

(btw - total '13 Federal tax revenue = $2.8T)

Now it's is growing among the intelegentsia that since the Fed announced it's taper, rates have gone down, maybe rates can stay low let's extrapolate and see who will be buying @ these forever low yields???

We have to rule out US domestic purchasers (States, insurers, pensions, etc.) as they cannot deploy their assets against 5yr or 10yr or 30yr US bonds yielding 1.70% to 3.5%, respectively, and catch up from their underfunded current states to meet their 7-8%/yr growth to ultimately meet their payouts.  They are acting rationally.  No buyer here.

Fed - we'll they are tapering to zero and will not monetize the debt.  And heck, they'll likely start to shrink their balance sheet by not rolling over existing...This is rational that the Fed shouldn't cause a hyperinflation via monetizing the debt...No buyer here (wink wink).

This only leaves "foreigners" who apparently don't mind the low yields, don't care the US trade deficit has fallen in half since '07, and apparently should be trusted to act irrationally.  This leaves only Belgium and the like to buy all new Note/Bond issuance plus pick up whatever rollover the Fed or Domestics don't maintain...or plainly put, by 2016'ish this will leave "foreigners" holding somewhere around 75% of all US public debt longer than 1yr.  Any concerns about the path we're on???

Or the other option is the Fed and "foreigners" are actually synonomous and the Fed will actually be holding 75% of all US debt over a year?  At least the interest paid would stay in the Treasury rather than being paid to "foreigners" and exiting the US?


mtndds's picture

Ok sorry for the stupid question, I am new here.  Why does everyone keep mentioning BELGIUM?

Alien 851's picture

Someone using Belgium as a front to buy up US debt. China quit buying some time back so ....who/what is now the second largest buyer of US debt?  See other ZH post on this date. 

Ham-bone's picture

Simple questions (and no bullshit, smart-ass answers...lookig for plausible answers):

Fed tapers to zero by year end (and assuming this isn't the Fed reach-around)

who are the buyers stepping in to purchase the $45 B /mo of Notes/bonds the Fed was buying?  and Why???  

Who would need / want more 1yr plus Note/Bond US paper yielding very little and from an "investment" standpoint take a big underperformance vs. other available assets??? 

Who had all the USD cash sitting around that they apparently don't even need to sell (since all markets are near record highs) to bid up these Treasury's??? 

How is this rational since US trade deficits have fallen in half since '07 and thus far fewer exported dollars need be recycled back into imported dollar vehicles???

centerline's picture

The only logical answer beside this being a massive circle jerk is international capital flows.  Money fleeing even worse economic conditions but not trusting US equities.

Ham-bone's picture

where is the selling to raise these Trillions of dollars with which to buy these Treasury's??? 

There's only buying everywhere and selling no where...

HardlyZero's picture

Ham-Bone, very good table of information...When we have picture(s) of the selfie reach-around it will be market shattering.

or maybe the EU, BIS, IMF are involved too (a reach around ring ?).

Who bought the US$300B of treasuries for the last 4 months, mystery buyer ?

Need Pictures.

Battleaxe's picture

By "reach around ring" do you mean CIRCLE JERK!!??

HardAssets's picture

Fed's Dual Mandate:


- Steal from the American people

- Lie to the American people

Gringo Viejo's picture

Show me something, ANYTHING, that isn't a lie.

Pooper Popper's picture

Show me something, ANYTHING, that isn't a lie.

obamas a dick!

Troll Magnet's picture

1. Barry & Eric are CRIMINALS.
2. Michelle is the ugliest FLOTUS in history.

Professor Fate's picture

I was going to post that identical comment Gringo but you just beat me to it.  There is not ONE lie...It is ALL lies.

Fate the Magnificent
"Push the Button, Max"

ebworthen's picture

The FED fabricates everything; it is a paper mache thug that robs the citizenry and force feeds us glue.

Winston Churchill's picture

Thank Dog they are audited.

Oh wait........

youngman's picture

Just turning Chinese.....we want a make it happen...

Glass Seagull's picture



The difference must be payday loans and Colonial Food Scripp backed "University" of Phoenix student loans. 

flowlessflow's picture

QE? new debt on its own book?

Cognitive Dissonance's picture

"Is the Fed fabricating loan creation data?"

Does a bear shit in the woods?

CrashisOptimistic's picture

Who does the student loans?  Maybe that's the source.

paddy0761's picture

When it becomes serious, you have to lie.”
Jean Claude Juncker 

Enceladus's picture

The difference is obviously  a loan to Belgium

spanish inquisition's picture

 In addition, Napoleon ordered the almost empty bins in the store-shed to be filled nearly to the brim with sand, which was then covered up with what remained of the grain and meal. On some suitable pretext Whymper was led through the store-shed and allowed to catch a glimpse of the bins. He was deceived, and continued to report to the outside world that there was no food shortage on Animal Farm. There is no shortage of borrowing in Fed loan data land!