In contrast to the clear expansion of credit through state banks in the Chinese economy, credit available to businesses and households appears to have been contracting in the U.S. economy since the start of March. Bloomberg’s Business Insider carried an article April 17 citing a Morgan Stanley “strategist,” Michael Wilson, as having said in a note to his subscribers that the first two weeks of April “have shown the steepest decline in lending on record…. The data suggest a credit crunch has started.”
While there is no actual “data” provided in that report, the Federal Reserve’s most recent report on U.S. banks’ assets and liabilities shows that there has been a decline, since March 8, of total “bank credit” by 1%; of “loans and leases” within bank credit by 2%; and of “industrial and commercial loans” by 2.5%. This data covered only through April 5, so it is not clear what the Morgan Stanley strategist meant by the steep decline in “the first two weeks of April.” But any absolute decline in these system-wide loan figures is unusual, and in this case clearly shows the impact on smaller banks of losing approximately $200 billion, or 4% of their total deposit base, in March and the first week of April. Moreover, Wells Fargo, the first Wall Street bank with a large commercial bank unit to report first quarter results, also acknowledged losing deposits—about 3% of its total deposit base.
