New data released late Friday by the Federal Reserve squash the idea that a
credit crunch is developing in response to recent problems in the subprime
sector. Each Friday the Federal Reserve reports on the amount of money extended
by the nation's commercial banks via loans, leases and securities purchases.
The data provide a clear gauge on lending activity in the U.S.
The data are
comprehensive, meaning that if the problems in the subprime sector are
broadening out, it would be obvious within the data.
For those who are
shepherding the idea of a credit crunch, their claims are a sham. The Fed's
data show that bank credit expanded rapidly in the week ended Feb. 28,
increasing $34 billion to $8.410 trillion.
The gain follows other large gains
over the past five weeks, which have seen bank credit expand at a 13% annual
rate, which is faster than last year's gain of 11% and 2005's gain of 10%.
In
addition to these data, it is notable that bond issuance was very robust last
week, with issuance on Wednesday and Thursday totaling over $20 billion, five
times the normal amount.
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Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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