Banking Bucks the Trend and Stays Mired in Muck
If only the banking sector were like every other in the economy.
While most of the economy showed signs of “firming” in July and August, the banking and financial services sector remained a mess, as loan demand remained weak and credit standards tight (and not necessarily in that order), and any improvements in the sector seemed spotty and inconsistent, according to the Federal Reserve’s Beige Book released today.
Here’s the banking and financial services report:
Most Districts reported that loan demand was weak and that credit standards remained tight. New York, Philadelphia, Cleveland, Richmond, Kansas City, St. Louis, and San Francisco observed further 
weakening in loan demand across most categories. Dallas noted scattered reports of improvements in loan demand. Contacts in Cleveland, Chicago, and Dallas noted an increase in demand for auto loans. Credit standards ranged from unchanged to tighter in most Districts. However, Chicago reported that credit conditions and availability had improved.
Mortgage activity declined modestly according to the Philadelphia, Cleveland, and Kansas City Districts, while Richmond reported increases attributed to improved demand for starter homes. Dallas noted an uptick in refinancing activity. Commercial and industrial lending declined in the Philadelphia and Kansas City regions, and was steady according to Richmond. The lack of available credit was cited as an issue for both residential and commercial contractors in Cleveland, and for commercial real estate borrowers in Atlanta. San Francisco reported an increase in venture capital investment.
Further deterioration in credit quality was noted by Philadelphia, Richmond, Dallas, and San Francisco, whereas Cleveland observed some improvement in credit quality. Chicago also cited improvements in credit quality, apart from home equity and commercial real estate. Dallas and Chicago noted increases in consumer bankruptcies, while rising delinquency rates were reported by New York and Cleveland.
The Beige Book is always a mash of qualitative musings by the Fed district banks, and it deserves a fair amount of salt when considering its implications. But the fact that districts did not show a consistent trend tells you banking remains in flux. This time, the Beige Book deserved its color — blah!
Some additional coverage of today’s Beige Book from around the web:
