Friday, April 25, 2008

What credit crisis? - Commercial and Industrial Loans are still growing

The current credit crises claims many victims from CDOs to credit spreads to Libor but commercial and industrial loans are not one of them. According to Federal Reserve Bank of St. Louis loans to cooperations are still growing in a meaningful way. In March 2008 the weekly loan volume change from year ago levels was a record $130 billion. As you can see from the graph (red circles) before the 1990-1991 and 2001 recessions commercial lending activity slowed meaningfully. This suggests that commercial and industrial loan volumes by large commercial banks are not at recessionary levels yet. Loans to consumers are also growing strongly. In March 2008 the weekly loan volume change from year ago levels was also a record $70 billion.

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Not surprisingly real estate loan volume is shrinking since the credit crisis began in July of 2007. Loan volume growth as a change from year ago levels is down peak to trough by $250 billion but has picked up somewhat in March 2008.

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The credit crisis, although showing signs of easing, is still pressuring short term money markets. Various credit spreads are still at stress levels indicating a nervous loan environment among commercial banks.

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source: Release: H.8 Assets and Liabilities of Commercial Banks in the United States
Board of Governors of the Federal Reserve System

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