Credit Crisis Hits Imaginations Hard
Alan Reynolds of the Cato Institute published an excellent article in Forbes Magazine recently. Citing the buzz from politicians, wonks and pundits who claim the credit crisis has frozen lending across the country, Mr. Reynolds replies: "Oh really?"
Citing weekly data collected by Forbes, Mr. Reynolds shows that lending is actually up from a year ago.
U.S. Bank Loans (Billions of Dollars)
Week Ending Wednesday | Business (Commercial & Industrial) | Real Estate | Consumer | Interbank (Other Than Fed Funds) |
Aug. 13 | 1,514.5 | 3,639.4 | 841.6 | 77.6 |
Aug. 20 | 1,509.1 | 3,653.3 | 845.6 | 75.3 |
Aug. 27 | 1,515.1 | 3,650.6 | 848.0 | 76.3 |
Sept. 3 | 1,514.8 | 3,631.3 | 846.8 | 77.2 |
Sept. 10 | 1,512.0 | 3,630.3 | 850.5 | 74.0 |
Sept. 17 | 1,531.2 | 3,625.2 | 847.1 | 72.3 |
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Year Ago: |
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Aug. 2007 | 1,311.1 | 3,498.4 | 774.0 | 82.7 |
Federal Reserve Board, "Asset and Liabilities of Commercial Banks in the United States" (H.8).
Reynolds writes:
In August, bank loans to consumers were 9.5% higher than they were a year earlier--the fastest increase since 2004. The year-to-year increase in consumer and industrial loans was 15.5%, down only slightly from a recent record high of 21.6% in March. Real estate loans were up 4.1% for the 12-month period ending this August--flat lately, but not down.
Did bank lending suddenly turn south since August? The latest data is for the week ending Sept.17, when the U.S. expropriated 80% of AIG (nyse: AIG - news - people ) equity and thus tanked most financial stocks. U.S. bank credit hit a record of over $7 trillion in the latest week--up from $6.57 trillion a year earlier and $6.92 trillion at the end of July.
Contrary to many comments, consumer and industrial loans actually increased in the latest week. Troubled giant banks have cut back on lending, but smaller banks have picked up the slack. Consumer and real estate loans dipped insignificantly through Sept. 17, remaining much higher than they were a year earlier.
His conclusion is that the credit crisis has hit Wall Street's financial firms, not Main Street. The more information that becomes available, the more it seems the bailout is a scam on the American people. The hardest part of the credit crisis isn't figuring out what the bailout should look like, but how to avoid one.
