Popular beliefs about the credit crisis, like that bank lending has frozen solid, are incorrect, according to new analysis
The assumptions of US policymakers like Ben Bernanke, chairman of the Federal Reserve, and Henry ‘Hank’ Paulson, US Treasury Department secretary, regarding the credit crisis are wrong, claimed a report.
Many measures of lending have actually increased during the crisis and are at record levels, according to the report by Celent, part of the Oliver Wyman Group.
Celent found that far from seeing a tightening of credit, a number of measures show that credit has expanded, and lending markets are in surprisingly good health.
'It appears that policymakers are making a variety of mistakes regarding the current financial crisis. If that is the case, the policy tools that they are employing may very well be the wrong ones,' said Octavio Marenzi, head of Celent and author of the report.
Using publicly available data, the report found:
Overall lending by US banks is at a record high and has increased during the credit crisis.
Interbank lending is at record highs and has increased during the credit crisis.
Consumer credit is at record highs and has increased during the credit crisis.
Commercial paper markets are operating within their historical norms.
Lending by banks to businesses is at record highs and has been growing rapidly.
Municipal bond markets are operating within their historical norms.
Deposits at banks have shown a substantial increase since the start of the credit crisis.