Thursday, November 12, 2009

About the "Banks Not Lending" ....

Notice consumer credit loans typically flatline during a recession and a little bit after. The one exception was the 2001 recession. While we haven't had a contraction like the current contraction in consumer credit, the decline is consistent with recession experience.

C and I loans either flatline or decrease after a recession. Recent experience is 100% in line with historical patterns.

The point of these charts is simple: during and after a recession credit demand drops. The reason is really simple. People borrow less money when the future is uncertain.

As demonstrated in the latest senior loan survey lending terms are getting easier; banks are trying to make loans. My guess is the terms are still harder than they were at the height of the "if you have a pulse you can get a loan" phase of the last expansion. But the point is business and consumer borrowers are decreasing their loan appetite at the macro-level.