Consumer Credit Outstanding Continues To Decline

The Federal Reserve just released consumer credit data for November. The moral of the story: consumers are paying off some of their debt and/or not getting much new credit from banks. You might remember all of the demands that Congress put on banks to increase lending during the bailouts. In theory, if they had, then credit outstanding should have increased over that period. Well, I thought it might be fun to see just how effective (or ineffective) that pressure was.

According to the data, banks must not have been too ambitious in providing more consumer credit. In fact, since September 2008, consumer credit outstanding has declined. Here's a chart:



This shows a decline of 4.4% in total consumer credit outstanding over the period from September 2008 through November 2009. Revolving and non-revolving credit decreased by 10.4% and 0.8%, respectively.

So who's to blame? Let's look at how the debt holders have changed the amount of credit they have outstanding to consumers from the third quarter of 2008 to November 2009:



I find this chart rather fascinating.

Observation 1: Wow Federal Government. Your consumer debt outstanding has increased by 72% in less than five quarters! That's the kind of lending growth that only Uncle Sam can provide.

Observation 2: Finance companies saw a sharp decline. That makes sense, considering so few finance companies are left and how cash poor they are. Think about the struggles of CIT and GMAC. At least banks have deposits. Finance companies have likely had far more trouble securing financing to originate more loans.

Observation 3: Securitization is also way down. Remember, this even includes the Federal Reserve's programs to prop up the securitization market. Once the Fed withdraws that support, securitization will likely be even slower, meaning that consumers will have a much harder time getting credit.

Observation 4: Commercial banks, credit unions and savings institutions have largely kept their consumer credit portfolios constant in size. So they didn't do a whole lot of new lending since the bailouts, or at least they didn't grow the amount of consumer credit on their balance sheets. Any lending they did merely replaced what was paid off or what was written off.