Sorry Goldman: The Loan Collapse Is Real

Tyler Durden's picture

Two weeks ago, in order to preserve Goldman's happy narrative that US growth is still strong (which is ironic because while on one hand Goldman tells its clients to buy the dollar, at the same time it tells Trump to short it), Goldman tried to justify the apparent collapse in loan growth, which as we showed earlier this week, is growing at the slowest pace in 6 years, and will soon contract outright.

What Goldman said boiled down to a form of "calendar effect", or the argument that since loan creation had aggressively ramped up one year ago when E&Ps were aggressively drawing down on revolvers, it made Y/Y comparisons appear like a big slowdown, when in fact the current rate of growth was mostly stable and reflected roll offs of borrowing bases. This is what Goldman said:

C&I bank loans represent yet another casualty of the energy sector contraction of 2015 and 2016. More specifically, we believe the current C&I slowdown reflects payback from credit facility usage by commodities firms, many of which began drawing upon credit lines in late 2015 as financial conditions tightened and the debt issuance window closed. Following a brief acceleration in C&I lending in early 2016, bank loan growth waned in late 2016 and early 2017 once capital markets reopened and banks renegotiated and restructured credit lines. Available loan data are consistent with the timing and sector-level incidence of these inflections, and in our view, the credit line payback story is the most likely explanation of the current C&I loan shortfall, which we peg at roughly $100bn.

Today, in addition to reporting the worst mortgage applications number since the financial crisis, as US consumer demand for mortgage imploded at a pace indicative of an outright recession and confirming the Fed is unable to hike rates further without crashing housung, Wells Fargo provided a handy slide which provided some further color to Goldman's theory. 

What it found was that while Commercial Loans, and specifically C&I loans, which slid by $1.6BN sequentially, have indeed dropped in part due to a reduction in O&G loans, "with ~50% of the reduction from proceeds that borrowers have raised in the capital markets and used to payoff/paydown loans" and the "additional payoffs/paydowns resulting from the strong and liquid capital markets environment"...

... the loan slump was far broader, and in addition to commerical loans, it also had a far greater impact on consumer loans, which saw a decline across every single category, for one simple reason - lack of demand.

Other banks reporting today, such as JPM, Citi and PNC confirmed that the loan slowdown is real, and that the US is fast approaching the debt destruction-driven economic contraction which the Fed will need to explain and justify Trump's sudden desire for lower rates and USD, and, by extension, QE.

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Troy Ounce's picture

 

 

Wait a minute! Is there something REAL in the US?

cheka's picture

gold should be exploding upward

Troy Ounce's picture

 

Gold = paper = nonsense = USA..USA..USA!

Son of Loki's picture
Rising gas prices are a growing threat to the American way of life

 

http://www.businessinsider.com/how-rising-gas-prices-impact-economy-2017-3

 

Gas prices have been shooting up...gonna hurt landlords since when tenenats hurt from lower volume (foot traffic and purchases) then Landlords also feel da pain.

divingengineer's picture

Seems like I've seen this article before. Like circa 2008?

Apocalicious's picture

Sure! Like lower REAL wages, and negative REAL rates!

halcyon's picture

Hey! Waittaminute! It's not Negative.

Yet...

 

Hongcha's picture

Ask the guy living in a tent under an overpass in Oakland.

SgtShaftoe's picture

The economy is failing and to deflect the blame from the bankers, politicians and FED they're taking us to war. Though it's not just any war, it's WWIII! Fucking evil bastards, satan's little helpers.

Troy Ounce's picture

 

"Every War is a Bankers War."

You've been a member of ZH longer than me. Congratulations. But you should know this by now.

SgtShaftoe's picture

Oh I know it well. I saw it with my own eyes and lost friends to those wars. I'm just restating the obvious.

new game's picture

okay to let some anger out...

Troy Ounce's picture

 

I am sure SgtShaftoe also has the problem that people are avoiding him because "you are so damn negative".

nufio's picture

this certainly happens to me a lot! 

Arrow4Truth's picture

It's not paranoia, just heightened awareness.

jago's picture

can some of this be offset by the P2P market?

Giant Meteor's picture

Not a snowballs chance in hell ...

Smoke em if ya got em ...

Conax's picture

As long as we blow the shit out of somebody, someplace I can live on dog food, you bet. A happy gourmet, I have a recipe.

We don't need no stinking jobs we need WWIII.

 

Giant Meteor's picture

Well if you're going with the dry, mix in a little rain water to make excellent gravy ..

 

buzzsaw99's picture

there has been a lot of fake news going around so i don't know if i believe this.

j0nx's picture

I know I don't when homes in NoVa are getting mulitple contracts in days. Shit is heavily area dependent and DC metro RE is strong to quite.

gougeonit's picture

This business will get out of control! It will get out of control and we'll be lucky to live through it!

AGuy's picture

"This business will get out of control! It will get out of control and we'll be lucky to live through it!"

Funny as I remember him promoting Reverse mortgages and other financial scams for the bankers.

https://www.google.com/search?q=fred+thompson+reverse+mortgage+youtube&h...

corporatewhore's picture

everyone is broke.  who can afford a loan, much less get approved for one?

Kayman's picture

Take out a car loan. They will give you your down payment and cash back. Of course, there is the issue of the 7 year loan...

corporatewhore's picture

I'm waiting for the 120 LTV mortgage to resurface or has it?

corporatewhore's picture

nevermind.  i just found one that will let you buy the home and pay off your student loans.  God Bless America!!!

07/08 is here again,   Happy Days!!!  Prepare accordingly.

natashav's picture

Most of the rich are broke too,

that's the irony...

It's all fiat cash...

Funny how they all want this...

Even if they short it and make billions...

what's the point if there's no market for you to continue to steal from..

rosiescenario's picture

Perhaps part of the mortgage decline is due to the fact that some folks have realzed that  local governments, in order to pay for unfunded pension liabilities, are and will be imposing confiscatory property taxes. In cities that have been under Dem control for ages we have seen the public employee unions end up with astronomical pension benefits which now obviously were never adequately funded. To pay these, property taxes are skyrocketing. In addition these same communities have witnessed a shrinking property tax base from the commercial sector as retailers and malls disappear, leaving the homeowner to shoulder a mounting burden.

But who cares....lets focus our attention on Syria which is so important to our national interests....

Scuba Steve's picture

Hmmm, let's see ...

Lower Returns in 401ks ... Check

Reduced or No  Pensions ... Check

Higher Property Taxes .... Check

Ever Increasing govt handouts ... Check

Heavily Armed Civilian population ... Check

 

I'm thinking this is not going to end well,

Getting Real and Interesting.

UnschooledAustrianEconomist's picture

I like the part about the heavily armed civilian population. Doing my part on this side of the Atlantic.

Hongcha's picture

A good list.  I am encouraged & cheered by the last item; it's the sole and only hope for a free man.

sinbad2's picture

Yes, Syria Russia and North Korea are just to distract, there is some nasty shit going down, but they hope to get it done before the people find out.

In.Sip.ient's picture

Somebody ( in NYC... WS to be specific ... do I have to

draw a picture LOL ) is whistling past the grave yard...

 

aliens is here's picture

Can't we just get WW 3 started and get it over with? I am sick of all the drama.

Troy Ounce's picture

 

@Aliens is here

You must be South African?

UnschooledAustrianEconomist's picture

Sorry dude, you gonna get to watch to whole opera, not only the fat lady sing.

I recommend booze. Lots of booze.

farmboy's picture

Why anyone reads GS stuff is a complete riddle to me.

Truth Eater's picture

Because blowing up $835,000 bombs, killing people and destroying cities is productive for the economy.  Time to ratchet up the fear levels and make loud noises to scare the cattle into the chutes. 

Scuba Steve's picture

" Hey Fred, these cattle ain't budging, and they are looking at us funny with vengeance in their eyes. They dun went and got smart Fred"

" We need to get some more of dem brown cattle, they herd easier and don't eat much"

Kayman's picture

I wonder if beating the drum for war eventually got the average Roman desensitized to the point of welcoming a change in Masters.

sinbad2's picture

When the Vandals showed up, average Romans were pointing out the Roman politicians, so the Vandals could kill them.

natashav's picture

My best strategists on wall street predicting the collapse is 6-9 months 

unless of course all the sudden somebody wants to make things better...

but clearly not looking that way.

Canary in the Coal Mine, Paul Tudor Jones has shorted and he's usually right.

Hold on tight. It's going to get ugly.

That MOAB Trump dropped today may just have been a test to see what it looks like when they drop one of the United States.

Nuking a few cities should get everyone inspired right?

Dresden all over again.

 

orangegeek's picture

chi-coms pay in cash and they are the ones driving real estate prices

 

 

Houses Depreciate's picture

Ehhhh no. 

The chinks are using borrowed money like everyone else. And it's not going to end well.

Sorry_about_Dresden's picture

I do not agree. Chinese pay cash, have 780 credit score and no debt. American consumer is tapped out. Think of China as 2 billion consumers w/ perfect credit and no debt. While Gov't run entities, businesses, are heavily in debt, the common man is not. There is huge misconception in USA where they think huge gov't debt = huge personal debt, but this is not so. You need to study Chinese persons aversion to personal debt. You are mislead by MSN.