The Federal Reserve Bank's "Beige Book" - in which the 12 banks survey the conditions in their individual regions - was largely filled with little new or interesting data. More than likely, short term investors are going to focus on the high level of export growth seen over the last few months and the fact that while interest rates have not appreciated much (if at all), all reports are that credit is much more difficult to obtain than it was last year.
By and large, my experience supports the observation that most banks have become much less willing to extend credit. But, what I am seeing are those clients whose applications for business or personal loans conform to what were considered standard ratios just a few years ago, are finding credit fairly easily to get - at least from institutions who haven't been battered by the sub-prime debacle. In short, I would say that the period of easy credit (lets say from 2005-2008) has come to an end, but conditions are fairly conducive to responsible borrowing. And, those institutions who didn't expose themselves unduly to high risk lending are benefiting from less competition and low interest rates.
To me, this suggests a significant bifurcation has developed between institutions and borrowers. Highly rated credit seekers and well-run borrowers are likely to benefit, while more speculative enterprises are similarly more likely to suffer. Unfortunately, speculation is the primary method by which high returns on equity are achieved and by which aggregate growth is driven. Let's hope that those institutions who haven't been battered by the recent financial turmoil see this as an opportunity to extend their reach into more speculative sectors. But, that they do so with more prudence than their predecessors...
No comments:
Post a Comment