Credit Watch Nov2009

The Motley Fool

Credit Watch David Meier November 10, 2009

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The Motley Fool

Summary

• Credit continues to contract from both supply and demand side • Loan officers continue to report tightening, but at a slower pace; few reporting easing • Balance sheets are being repaired • Government has to step in to fill the void or GDP will contract

David Meier

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The Motley Fool

Consumer Credit Contraction

Growth

Contraction

David Meier

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The Motley Fool

Consumer Credit Contraction

Fewer banks tightening, but survey shows virtually no banks loosening David Meier

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The Motley Fool

Consumer Credit Contraction Willingness seems to be returning …

But the demand for loans just isn’t there.

David Meier

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The Motley Fool

C&I Credit Contraction

Growth Contraction

David Meier

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The Motley Fool

C&I Credit Contraction

Fewer banks tightening, but survey shows virtually no banks loosening David Meier

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The Motley Fool

C&I Credit Contraction Fewer banks are increasing spreads …

But the demand for loans just isn’t there.

David Meier

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The Motley Fool

Conclusions

• Banks still don’t want to lend – Can’t blame them when they can borrow short from the gov’t to lend long to the gov’t toearn a ~3% spread with little risk

• Consumers don’t want to borrow – Can’t blame them given their balance sheets need to be repaired, too

• Exactly what happens in a balance-sheet recession according to Richard Koo – Balance sheets must be repaired

• Government must step in to prevent GDP from contracting David Meier

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