Total lending by commercial banks showed a decline in loans (Loans and Lease) at the end of 2008.

The credit contraction was very sensitive in the US after this date; the aid granted from September 2008 has not changed the situation. It can even be argued that this aid had no positive effect on commercial banks. Aid from the Federal Reserve is therefore not found in all credits granted to the US economy.

Loans to the commercial and industrial sectors confirm this finding. The contraction of credit is extremely strong, especially after the crisis of autumn 2008. This credit deficit for US companies leads us to make two remarks:
Companies in good health accessing the financial market or stock market (Corporate business) have found the means to finance in recent months, investors were at the rendezvous.

On the other hand, companies in the Corporate and Non-Corporate Business sectors in difficulty could only meet the greatest difficulty in obtaining bank loans. The explosion of bankruptcies and unemployment reflects this situation.

Individual consumer credit did not decline immediately after the fall 2008 crisis, and these credits fell from the beginning of 2009 due to the inexorable rise in unemployment that led to insolvent borrowers. It must be emphasized that these consumer credits represent only a part of this type of credit. Mortgage loans covering consumer loans (cash extraction through the reloading of real estate loans or current and future real estate gains) are not included in this graph, which is only an indicator of trend.

Remain commercial mortgages of commercial banks whose evolutions are more contrasted. The housing crisis of 2007 led to their fall in spring 2008; the renewed lending of autumn 2008, results in their stagnation during the winter of 2008 and the spring of 2009, stagnation followed by their significant decline in the 3rd quarter of 2009. We will return below to the reasons for this paradoxical evolution of mortgages. the amount of which increases in the midst of the housing crisis.

In sum, the credit crisis resulted in a general contraction in commercial bank lending explaining the depth of the recession. Accustomed to developing massive collective debt, the US economy could only suffer from this sudden drop in commercial bank credit affecting all forms of credit.

Federal Reserve aid – which has benefited a large number of banks – has avoided a depression that would have been the consequence of the bankruptcy of the entire financial system collapsing like a house of cards. This aid could not prevent a recession because of the high levels of indebtedness in the US and the violence of the crisis. It is not useful to return to this post on the disastrous financing of real estate, the weight of consumer credit in the budget of many households and the indebtedness of financial and non-financial companies. We tried to give a general explanation in 4 posts on regulation (Regulation difficult I, II, III, and regulation impossible IV).

Commercial bank lending and investment operations.

When looking at total loans (loans and leases) and the bank investments added to them, one can see immediately that the shape of the curve is different from that of loans alone in 2008-2009. The lending curve is down sharply as the lending and investment curve regresses less sharply. To solve this problem, bank investments need to be examined more closely.

Banks’ investments are investments in debt securities.These are purchases of interest-bearing debts and not loans. This is the part of banking activities that are truly defined by the financial system, where customers – individuals and businesses – no longer have a place. It is, therefore, purchases of securities managed partly in the trading room.
These investments are subdivided:

1 ° in public securities constituted by mortgage-backed bonds of US agencies (MBS), treasury bills and non-securitized bonds of agencies (Non-MBS) (Blue on the graph)

2 ° Investments in “private securities” (red on the chart) combine commercial and real estate private mortgage loans (MBS), sub-federal government debt securities, ABS which are securitized debts of various types (credit consumer, student loan, CDO and CDO hybrid), short-term investments in mutual funds, investments in various foreign and domestic debt securities.

The addition of the two types of investments makes it possible to understand how the investments in the title correct the contraction of installment loans to the real economy which constituted the inaugural chart of this post.

This graph clearly shows that it is less the contributions to the real economy than the purchases of securities that have animated the banks. Their breakdown is dominated by agencies’ mortgage loans – dominated by securitized real estate (MBS) – and has a variety of private securities that combine non-real estate ABS with sub-federal debt instruments; mutual funds and, of course, shares. To this must be added all the operations on the hybrid products invented by the thousand and one Dr. Folamour de la Finance who are not included in the wiser sections of the Federal Reserve Bank.

We had to settle for a short period (Feb-Sept 15, 2009) to make our demonstration. Since the Federal Reserve’s statistics were changed in 2009, the data series became inconsistent with the less analytic data from previous years as of 2009. A subsequent post will return to the ratio of the loan (s) / investment (s) in the activities of commercial banks.

While the real US economy was in severe trouble, commercial banks opted for financial investments that allowed them to protect their capital and margins and eventually recover their health. The money poured into the financial system to support the banks have therefore ultimately resulted in feeding a circuit of buying speculative securities or safe haven without any benefit to the non-financial sector of the economy. The importance of the MBS (red on the chart) and ABS (Blue on the chart) shows moreover that the securitization products always have the wind in their sails, they are nevertheless one of the factors which amplified the crisis by diluting the risks.
It remains to question one last defense: the risk inherent in a real economy in full contraction would explain the attitude of commercial banks that would have had other shelters that invest in financial investments or debt securities.

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Do you want inexpensive car insurance and to save money on the cost of your next policy? I’m sure you do after all the cost of car insurance coverage is getting more and more pricey every year.

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That’s the problem; there’s always a few evoking the much. And it’s still less complicated than we think. And in an info crazy world (the Traditional western World) where grants plus money are tied to ‘discovering’ things. Simply let’s encounter it – is not great.

Make out a while to visit at least five quotes sites that offer quotes upon home insurance policies. Doing this will need around 25 minutes. When you visit each quotes web site, make sure you input the same info. Doing otherwise will come back misleading quotes. After you’ve attained your home insurance quotes, compare these to determine which serves your own interest best both in cost and value.

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