Banks Shamefully Lie About Liquidity In Today's WSJ

One of the lead stories in today's Wall Street Journal is a totally contrived piece of crap, entitled: "Lending Drops at Big U.S. Banks."

In this story, the Wall Street Journal, being spoonfed spin from many of our nation's largest lending institutions, would have us believe (infer...imply...etc...whatever) that consumer liquidity in the marketplace only dropped 1.4% between Q3 '08 and Q4 '08.

Top Beneficiaries of Federal Cash Saw Outstanding Loans Decline 1.4% Last Quarter

Lending at many of the nation's largest banks fell in recent months, even after they received $148 billion in taxpayer capital that was intended to help the economy by making loans more readily available.

Ten of the 13 big beneficiaries of the Treasury Department's Troubled Asset Relief Program, or TARP, saw their outstanding loan balances decline by a total of about $46 billion, or 1.4%, between the third and fourth quarters of 2008, according to a Wall Street Journal analysis of banks that recently announced their quarterly results.

A full list of the banks that have received TARP funds may be found right here, courtesy of the New York Times:  "Tracking the $700 Billion Bailout."

Technically, it is perfectly understandable to assume that loan balances these banks had in Q3 '08 actually did decline by 1.4% by the end of Q4 '08; but, that's because consumers were making payments on these loans for 90 days! So, one could say, from a technical standpoint, that the statement in the blockquotes, above, is accurate.

But, at the same time, it is very, very deceptive.

Speaking from firsthand experience (I own a small company that processes consumer credit applications for retailers across the U.S.), I can tell you that not only has consumer credit dried up by anywhere from 10% to 90% of what it was a year ago, depending upon the business sector; but, it dropped significantly--perhaps moreso than at any other time in the past year--during the last quarter of '08, as well.

In the housing sector, mortgages are but a fraction of what they were a year earlier. (Do I really need to push the stats here?) Second mortgages and home equity lines of credit are virtually non-existent. You really need a FICO score of 740 (roughly placing you in the top quintile of the population) or higher just to have a serious discussion with a lender nowadays.

In the retail automotive arena,  auto dealers are being hammered by lending institutions in an industry where consumer finance is the mainstay of sales. This just appeared over the weekend: "GM Says Tight Credit Is `Biggest Issue' for Dealers."

GM Says Tight Credit Is `Biggest Issue' for Dealers
By Alex Ortolani

Jan. 24 (Bloomberg) -- General Motors Corp., the world's second-largest automaker, said a tight credit market is the most difficult hurdle for its network of about 6,375 U.S. auto showrooms.

"Credit is the biggest issue we're hearing about from the dealers," Mark LaNeve, GM's head of sales, told reporters in New Orleans at the National Automobile Dealers Association.

Tight credit restrictions make it difficult for consumers to get loans to buy cars as well as for dealers to finance their own operations, LaNeve said. Credit is constrained even after the federal government gave GMAC LLC, the lender affiliated with GM, and Chrysler Financial, the credit arm of Chrsyler LLC, $6 billion and $1.5 billion, respectively, in loans...

London-based HSBC, one of the largest players in the retail auto sector, simply shut down their auto lending operations a couple of months ago, leaving hundreds of dealerships throughout the U.S. without a primary financing source for their customers. (But they're not even on the "10 out of 13 top recipients of TARP funds" list covered in the Journal's article this morning.)

When it comes to home improvements (i.e.: anything that's considered a capital improvement on your home, lenders are simply walking away from the entire vertical), over the past couple of months,  GE Credit--a recipient of roughly $120 billion in "non-tarp," government guaranteed backstops--one of the largest lenders in the country, has simply stopped providing credit in the entire vertical! Capital One, just this past week, notified most (if not all) of its home improvement merchants that it's no longer writing loans in the sector.

In the big-ticket retail space, covering everything from consumer electronics, to home furnishings, to musical instruments (and everything in-between), it's nothing short of a wasteland,  and quite similar to what we're seeing in the housing sector. GE is also a big player in this sector, and it's almost as bad for GE's merchants  in big-ticket retail as it is for those that specialize in the home improvement space. (See paragraph immediately above.) To make matters worse, CitiFinancial, another large player in these big-ticket retail verticals, is simply going to "dispose" of the entire subsidiary in coming months, per announcements from Citi regarding same over the past week.

So, when I see a lead story in today's Wall Street Journal deceptively proclaiming that lending is off 1.4% at 10 of the top 13 recipients of the government's TARP funds, I simply cannot believe that the WSJ would actually attempt to put forth this totally bogus claim and then place it on page one of their rag.

But, they did just that this very morning.

Consumer lending's not off 1.4% from the previous quarter.  Today's Wall Street Journal story's a complete sham! On average, I'd say it's somewhere around half of what it was a year ago. (Our company will process more than a billion dollars in consumer credit applications this year. We see this downswing from a rather comprehensive and strategic viewpoint, firsthand.)

Shame on the Wall Street Journal!

It's time to put some guarantees in our government funds when it comes to insuring liquidity in the marketplace, dammit! It's at the heart of the effort needed to pump life back into our economy.

What do you think of today's WSJ propaganda?

Tags: banks, big-ticket retail sales, Capital One, Citifinancial, consumer credit, credit, GE Credit, liquidity, mortgages, retail auto sales, U.S. Economy, Wall Street Journal (all tags)



Tips, because it's time to force liquidity into...

...the marketplace with every cent this government spends bailing out the financial services sector from this point forward.

by bobswern 2009-01-26 02:14AM | 0 recs
Re: Banks Shamefully Lie About Liquidity In Today'

I always enjoy your take Bob. Keep it up. Rec

by Politicalslave 2009-01-26 03:54AM | 0 recs
Financial jornalism has always been pathetic......

in this country. It is not surprising to see WSJ headline. WSJ and CNBC have been cheerleaders for John Thain and his ilk before they turned against him. There was very little criticism of the bankers and the wall street shannanigans. Unfortunately most people on MYDD are pretty ignorant when it comes to economy and fiscal matters.

by Joshuagen 2009-01-26 05:03AM | 0 recs
When I read the WSJ about issues like this

I assume they are lying through their teeth...

Compared to the Economist, which while pro-business doesn't kick reality to the curb in it's approach, the WSJ is strictly a mouthpiece for pro-business propaganda.

The WSJ thinks characters like Thain are to be amired as "Big Swinging Dicks" as Michael Lewis calls them, while successful but ethical people like Warren Buffett are just left-wing nuts.


by WashStateBlue 2009-01-26 07:59AM | 0 recs


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