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.

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:

The Big Picture
Calculated Risk
Reuters
NPR’s Planet Money