Posted on 06/17/2009 7:28:48 PM PDT by givemELL
Here are the facts:
* We witnessed one of the biggest collapses of all time in “open market paper” — mostly short-term credit provided to finance mortgages, auto loans, and other businesses. Instead of growing as it had in almost every prior quarter in history, it collapsed at the annual rate of $662.5 billion. (See line 2.)
* Banks lending went into the toilet. Even in the fourth quarter, when the meltdown struck, banks were still growing their loan portfolios at an annual pace of $839.7 billion. But in the first quarter, they did far more than just cut back on new lending. They actually took in loan repayments (or called in existing loans) at a much faster pace than they extended new ones! They literally pulled out of the credit markets at the astonishing pace of $856.4 billion per year, their biggest cutback of all time (line 7).
* Meanwhile, nonbank lenders (line 8) pulled out at the annual rate of $468 billion, also the worst on record.
* Mortgage lenders (line 9) pulled out for a third straight month. (Their worst on record was in the prior quarter.)
* And consumers (line 10) were shoved out of the market for credit at the annual pace of $90.7 billion, the worst on record.
* The ONLY major player still borrowing money in big amounts was the United States Treasury Department (line 3), sopping up $1,442.8 billion of the credit available — and leaving LESS than nothing for the private sector as a whole.
Bottom line: The first quarter brought the greatest credit collapse of all time.
(Excerpt) Read more at moneyandmarkets.com ...
Looks like a great resource.
Thanks for posting.
The same as FDR, see elections matter.
The real crash will come when prime (not sub-prime) home loans start defaulting in large numbers.
It should start about 2011.
Good stuff thanks!
In case you missed this one...
Thanks for posting. Very interesting. The change in net worth of households (page 113...also red-boxed by Weiss) is telling.
I think this article has much of the private debt issue backward. Everyone is paying off their credit cards as fast as they can. Noone is taking on new debt. The savings rate this year (including debt reduction) in 5 times what it was last year. So of course private lending falls.
This article acts like the problem is the banks sitting on a bunch of money they don’t want to lend. But folks who qualify for loans aren’t borrowing and are paying down debt. Folks who don’t qualify aren’t getting them under more stringent lending standards. The banks would like to lend more money. Noone is borrowing.
This reduction in debt is a good thing. It’s part of how the economy would naturally recover from a recession created by too much debt.
Replacing all that progress with government debt sort of defeats the whole recovery from recession process.
I agree. Everytime somebody tells me the credit market has collapsed, I remind them of my untouched $300,000 line of credit on my house (my ‘rainy day’ reserve), although I admit that I’m worried that if things get much worse economically and I don’t invest most of that money that this line of credit might be reduced or canceled.
No more bubble surfing for the feds. Time to come down to reality where cash is king.
Banks are trying to shorten up, de-leverage and ride out the storm.
Also, everyone can see a monstrous inflationary bubble on the horizon so floating rate loans and short bond portfolios are becoming the standard.
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