On Jan 1, 2009, at 9:27 PM, Jordan Hayes wrote:
> The Financial crisis has also been associated with three
> widely held claims about the nature of the crisis and the
> associated spillovers to the rest of the economy. The financial
> press and policymakers have made the following three claims
> about the nature of the crisis.
>
> 1. Bank lending to non-financial corporations and individuals
> has declined sharply.
> 2. Interbank lending is essentially nonexistent.
> 3. Commercial paper issuance by non-financial corporations
> has declined sharply, and rates have risen to unprecedented
> levels.
>
> Here we examine these claims using data from the Federal
> Reserve Board and Bloomberg.
>
> Our argument that all three claims are false is based on data up
> until October 15, 2008.
>
> ---
> http://www.minneapolisfed.org/research/WP/WP666.pdf
>
> Are you guilty of this soundbite from the article?
Well a lot has happened since October (and their flow of funds data excludes the third quarter, and the monthly data ends in September).
Between October and December, interbank lending is off by 20%. C&I, which had been growing at a 20% annual rate in early 2008, is now contracting at a 4% annual rate. Overall bank lending, which had been growing at over 10% a year in early 2008, is now down to just over 1%. Nonfin CP, which had been growing at a 33% annual rate in July 2007, just before the outbreak of the credit crisis, was contracting at an 8% annual rate a year later. It's since recovered, as the Fed began its CP facility. But financial CP (and why overlook that? it's 3-4 times as large as nonfin) went from a 16% growth rate in 7/07 to -18% in 11/08 - though it too has been recovering in recent weeks.
And leading indicators haven't been good. Banks are pulling in lines of credit on credit cards, and the Fed's surveys of senior loan officers show a sharp tightening of standards. In the past, such tightenings have led credit growth by a year or more.
Doug