The Board of Governors Of The Federal Reserve System releases what it calls a “Senior Loan Officer Opinion Survey on Bank Lending Practices” four times a year, in January, April, July, and October.
According to The Federal Reserve, the “Senior Loan Officer Opinion Survey on Bank Lending Practices” is a “Survey of up to eighty large domestic banks and twenty-four U.S. branches and agencies of foreign banks. The Federal Reserve generally conducts the survey quarterly, timing it so that results are available for the January/February, April/May, August, and October/November meetings of the Federal Open Market Committee. The Federal Reserve occasionally conducts one or two additional surveys during the year. Questions cover changes in the standards and terms of the banks’ lending and the state of business and household demand for loans. The survey often includes questions on one or two other topics of current interest.”
To put the July 2023 Survey into perspective before its information is presented, the January 2023 survey reported:
“Regarding loans to businesses, survey respondents on balance reported tighter standards and weaker demand for commercial and industrial (C&I) loans to large, middle-market, and small firms over the fourth quarter.2 Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
Source: Fed Reserve
For loans to households, banks reported that lending standards tightened or remained basically unchanged across all categories of residential real estate (RRE) loans and demand for these loans weakened. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Standards tightened and demand weakened, on balance, for credit card, auto, and other consumer loans.”
Source: Fed Reserve
The April 2023 Survey then reported a the emergence of tighter bank money policies:
“Regarding loans to businesses, survey respondents reported, on balance, tighter standards and weaker demand for commercial and industrial (C&I) loans to large and middle-market firms as well as small firms over the first quarter.2 Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
For loans to households, banks reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government-sponsored enterprise (GSE)-eligible and government residential mortgages, which remained basically unchanged. Meanwhile, demand weakened for all RRE loan categories. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Standards tightened for all consumer loan categories; demand weakened for auto and other consumer loans, while it remained basically unchanged for credit cards.”
Source: Federal Reserve Board
The July 2023 Survey was the same as that for April, indicating the continuance of the tighter money environment that should slow the economy, but has not. (The question is, why hamper spending and hurt businesses, rather than impose price controls in key industries?) Here’s the July 2023 Survey:
Regarding loans to businesses, survey respondents reported, on balance, tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes over the second quarter.2 Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
For loans to households, banks reported that lending standards tightened across all categories of residential real estate (RRE) loans, especially for RRE loans other than government-sponsored enterprise (GSE)-eligible and government loans. Meanwhile, demand weakened for all RRE loan categories. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Furthermore, standards tightened for all consumer loan categories; demand weakened for auto and other consumer loans, while it remained basically unchanged for credit card loans.”
Source: Fed Reserve
Then, the July 2023 Survey Report adds this:
“Regarding banks’ outlook for the second half of 2023, banks reported expecting to further tighten standards on all loan categories. Banks most frequently cited a less favorable or more uncertain economic outlook and expected deterioration in collateral values and the credit quality of loans as reasons for expecting to tighten lending standards further over the remainder of 2023.”
Source: Fed Reserve
Is It 1979 All Over Again For Federal Reserve?
Normally, that would be the place where government would increase spending to offset the decline in market demand. That’s what makes this super-tight money policy strange, and arguably politically motivated.
The last time we had such drastic attempts to throw an unnecessary choke-chain around the American Economy was 1979, and the shift from an income policy to a monetary policy under the direction of Fed Chair Paul Volcker a Democrat who eventually shaped economic policy under six Presidents, but is regarded in some circles as the man who destroyed the American working class. The result was an American economy plunged into recession and a vote for the 1980 Republican Presidential Candidate Ronald Reagan over Jimmy Carter. Reagan ushered in a era that saw the rise of conservative and ultra-conservative political operatives. Arguably, the same forces are at play, today, but worldwide.
Christine Lagarde And The Imposition Of Conservative Monetary Policy
Two months ago, European Central Bank President Christine Lagarde remarked that her organization called for governments to avoid policies that supported the maintenance of incomes – in other words, no government policy to encourage consumer spending. As the European Central Bank’s focus is monetary policy, it looks like the approach that caused the recession of the 1980s and the rise of conservatism is happening all over again, but for the world’s industrial society. It must be noted here that Ms. Lagarde is a member of the center-right Union for a Popular Movement in France.
In America, social conservatism is the highest it’s been in a decade. In a recent Gallup Poll, 39 percent said they were conservative and 44 percent “economically conservative” – the highest rate since 2012 (and still President Obama was re-elected in 2012). On Tuesday, March 28th, 2019, The Guardian UK reported:
Conservatism is the dominant politics of the modern world. Even when rightwing parties are not in power, conservative ideas and policies set the shape of society and the economy. Ever since the transformative 1980s governments of Ronald Reagan and Margaret Thatcher – with their new fusion of disruptive capitalism and social traditionalism – the assumption in Britain, the US and far beyond has been that conservatism is the default setting of democratic politics.
Guardian UK
The bet here is that conservative political operatives are at work trying to form the climate for bad economic conditions that would lead to more wins for their candidates around the World. This author is prepared to admit the possibility that the view is incorrect, but history points to the very real possibility that such manipulations are occurring. Indeed, in The Week news opinion post of December 18th, 2018, Jeff Spross argues that the Federal Reserve’s job is “to save elite financial institutions around the globe, not rebuild Americans’ livelihoods.” It seems the same can be said for Christine Lagarde and the European Central Bank.
Let’s keep an eye on this.
Stay tuned.