We’ve got a heartache tonight … in terms of bank lending. Particularly commercial and industrial lending (C&I) and auto loans. Particularly since bank lending is the primary transmission vehicle for Federal Reserve policies.
C&I lending growth fell to 1.2% YoY, which has historically meant that a recession is close at hand.
Auto loans also fell to 2.1% YoY.
The good news? Real estate lending fell too, but to 5.1% YoY.
Have the stimulative effects of The Fed’s ZIRP and QE policies run out?
Listening to CNBC and Bloomberg TV, you might have gotten the impression that Hurricanes Harvery and Irma created such extensive damage (they did) that there would be labor shortages and a big rise in real wages.
Actually, both real hourly earnings and real weekly earnings YoY fell to under 1%.
There was a small pick-up “inflation” with core inflation remaining the same as in August: 1.7% YoY.
Even with two destructive hurricanes, all we can generate is 1.7% YoY?
But as expected, auto sales were elevated with households and businesses replacing their water-damaged vehicles.
Why did they name the hurricane Jose? Hurricane Janet would have been more appropriate.
The Student Loan Debt and Housing Report 2017 by the National Association of Realtors and the nonprofit group American Student Assistance shows that student debt delays household formation, home buying, and saving.
When 51% have student debt greater than $50,000, it will delay buying a home.
And purchasing a car.
Any wonder why real estate lending is trending downwards along with credit card and automotive loan growth?
Here some predictable information from the report. Thirty-two percent of student loan borrowers surveyed had defaulted or forbore on their student loan debt while two-fifths of borrowers who had personal incomes of less than $25,000 in 2016 had defaulted or forbore on their student loan debt in the past.
Of course, Federal government policies and The Fed’s low interest rate policies have help create a monstrous growth in student loans … and tuitions.
That is fine for those who don’t use credit on a regular basis, but what about those people who still wish to borrow funds to purchase a home or automobile? By NOT freezing your credit, you are at risk of loans being (fraudulently) taken out in your name.
Although Equifax was the primary recipient of market wrath, the other major credit monitoring companies Transunion and the UK’s Experian have experienced declined in their equity values as well.
And with real estate, automobile and credit card lending already in a decline YoY, imagine what a credit freeze will do?
Commercial bank lending for commericial and industrial (C&I) loans, real estate loans, credit cards and automobile loans are, as New Jersey native Bruce Springsteen sang, going down.
On a year-over-year (YoY) basis, major commercial bank lending activities are deteriorating with C&I loans contracting the most. To be sure, all four bank lendings products are still experiencing positive growth, but the trend is worrisome.
Overall, bank credit YoY is expanding at 3.4%, considerably lower than the 8% YoY growth rate in August-October of 2016.
But unfortunately, commercial bank lending is the primary transmission mechanism for The Federal Reserve’s monetary policy. Let’s hope that yesterday’s encouraging GDP report and boost bank lending.
It was bound to happen, despite Dodd-Frank legislation and the creation of the Consumer Financial Protection Bureau following the financial crisis.
(Bloomberg) — Amid all the reflection on the 10-year anniversary of the start of the subprime loan crisis, here’s a throwback that investors could probably do without.
There’s a section of the auto-loan market — known in industry parlance as deep subprime — where delinquency rates have ticked up to levels last seen in 2007, according to data compiled by credit reporting bureau Equifax.
“Performance of recent deep subprime vintages is awful,” Equifax said in a slide show on second-quarter credit trends.
I like seeing my friends in the news, like Amy Cutts at Equifax.
“It isn’t a case of chasing a larger subprime share,” Cutts said in an email Tuesday. There’s been “almost no change in median credit scores. That means they are letting other underwriting characteristics slide,” she said, referring to the lenders that issue the bulk of subprime loans — so-called monolines that specialize in one area of the credit market and dealer-finance companies that work specifically with car sellers.
Deep subprime (WAFICO < 550) was 30% of market in 2016.