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America’s Financial Landscape Is Stuttering, Fed Credit Survey Shows

Neil Campbell
Neil lives in Canada and writes about society and politics.
Published: February 8, 2023
A Federal Reserve bank survey shows that lending conditions have both tightened and suffered weakened demand across all sectors.
A file photo of a Party City, a chain which filed for Chapter 11 bankruptcy in early 2023, on Jan. 18, 2023 in Miami, Florida. New bank survey data issued by the Federal Reserve shows that credit conditions have tightened and demand has weakened across every single segment of the financial landscape. (Image: Joe Raedle/Getty Images)

America’s financial landscape is stagnating as demand for credit has weakened while lending conditions have tightened across all sectors, according to recent data published by the Federal Reserve.

The Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOO) for January of 2023 was published by the U.S. central bank on Feb. 6 and examines changes in standards, terms, and demand for bank loans to both households and businesses over the last three months “which generally correspond to the fourth quarter of 2022,” the document stated.

Commercial and industrial loans to all sizes of businesses were characterized as having “tighter standards” combined with “weaker demand.”


The same was noted of loans to the commercial real estate industry.

The situation was slightly better for residential real estate, the Fed noted, stating that lending standards had merely “tightened or remained basically unchanged,” but noted that, “demand for these loans weakened.”

Home equity lines of credit, credit cards, auto loans, and “other consumer loans” were also subject to the tighter standards and weaker demand monikers.

The Fed captured its data from a survey of “69 domestic banks and 18 U.S. branches and agencies of foreign banks.”

The news comes on the back of early January reports that in late 2022, the personal savings rate had set a new all time low of only 2.2 percent, rebounding slightly to 2.4 percent by November.

Specifically, the SLOO found that tightening conditions for commercial and industrial loans meant higher rates, spreads, and fees for loans and credit lines.

Banks have also begun demanding greater covenants and collateralization requirements, in addition to reducing the maximum size of credit lines, the Survey found.

In the residential real estate sector, “jumbo and subprime residential mortgages” were the targets of tightening, while bankers told the Fed that “standards remained basically unchanged for GSE-eligible and government residential mortgages.”

In consumer credit, the most significant change was a tightening of standards on credit card loans, while only “moderate net shares of banks” had reported tightening auto and “other consumer loans.”

Specific manifestations of policy tightening were displayed through a requirement for higher credit scores and lower credit limits.

Notably, the Survey also stated that banks were pessimistic that the economy would turn around this year, finding they “reported expectations of a broad deterioration in loan quality during 2023.”

The Survey also asked about the institutions’ opinion on “credit quality” for the remainder of the year, defined as “measured by delinquencies and charge-offs,” with the input received being that “major or significant net shares of banks reported expecting a deterioration in credit quality across all loan types over 2023.”

JP Morgan analyst Daniel Silver told Reuters in a Feb. 6 article that the Survey “looks consistent with an economy that is weakening.”

A Marketwatch press release explained the significance of the data in layman’s terms, “How much credit households use is seen as cue on the strength of the economy. Consumers tend to borrow more when times are good and cut back when the economy is weak.”

The stutter reported appears to manifest concretely in the Federal Reserve’s Feb. 7 Consumer Credit release, which revealed “in December, total US consumer credit increased by just $11.565Bn, which was not only a huge, 65% drop from November’s upward revised $33.1Bn print, but also a huge, 50%+ miss relative to consensus expectations of $25BN, the biggest miss since August 2020!” according to Zerohedge.

The outlet found that December’s non-revolving credit had pancaked at a $4.4 billion increase, a stark contrast against the $16.8 billion average increase.

Zerohedge stated the cause was “largely due to big slowdown in student loans, which actually contracted by $4.5BN in Q4, and increased just $23.8BN in 2022, even as auto loans continued to grow apace, and increased by $18BN in Q4, and a record $101BN in 2022.”

While previous data had pointed to a situation where those most impacted by record inflation, lower savings, and higher costs of borrowing were the lowest 20 percent of income earners, new data shows that the fire may slowly be spreading.

On Feb. 6, BNN Bloomberg reported that, “Side hustles are twice as prevalent as government data suggests, indicating that more Americans need to work multiple jobs to make ends meet amid historically high inflation.”

Relying on data collected by “economists including Stanford University’s Nicholas Bloom,” the outlet stated that almost 10 percent of work from home employees surveyed were “having a main job plus at least one other side gig.”

The figure contrasts against Labor Department statistics that only 5 percent of U.S. workers were juggling multiple jobs, Bloomberg added.

The Department’s January statistics showed unemployment clocking in at a 53-year-low as America gained 517,000 jobs.

And although the job market may not be dismal, Feb. 6 reporting by the Wall Street Journal cited Goldman Sachs as calculating that, while struggling with inflation, Americans had blown through an average of 35 percent of the $2.7 trillion in savings accumulated from Coronavirus Disease 2019 (COVID-19) stimulus checks and lockdown mandates.

The bank expects that figure to bulge to 65 percent before the year is out.

The article interviewed a 34-year-old Philadelphia-based freelance photographer as stating his savings went from $4,000 before the pandemic began to $20,000 over the course of two years.

But when facing 2022’s inflation, the man is now down to $2,000.

“I’ve never had the opportunity to have that much money saved in my life, so it almost felt like I failed at something,” he stated.

A secondary Jan. 30 WSJ article on the topic stated, “It’s a stark turnaround from the second half of 2020, when Americans lifted the economy out of a pandemic downturn, helping the U.S. avoid what many economists worried would be a prolonged slump.” 

The Journal attributed the economic strength to, “Consumers snapped up exercise bikes, televisions and laptop computers for schoolchildren during lockdowns. When restrictions were lifted, they rushed back to their favorite restaurants and travel destinations.