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Economic SYNOPSES
short essays and reports on the economic issues of the day
2009 ■ Number 36

Commercial Bank Lending Data during the Crisis:
Handle with Care
Silvio Contessi, Economist
Hoda El-Ghazaly, Research Analyst
ince the financial crisis began in mid-2007, media
a large contraction in this volume of total loans and leases
sources and academics alike have scrutinized data
does not mean that a contraction in the overall economy
from the banking sector to understand how lending
has not occurred. In fact, evidence suggests that other credit
to consumers and firms has changed. The graph shows
markets have been severely strained.4
total loans and leases by commercial banks and their components: real estate loans, individual loans, commercial and
Caution is necessary when
industrial loans, and other loans. This measure is part of
the H.8 data, which provide weekly aggregate balance
making inferences based solely
sheet data for commercial banks with a charter in the
on aggregate loans data.
United States.1
If considered over the past three decades, the series
Third, since the onset of the crisis, several financial
appears approximately on trend but slightly erratic during
services companies and thrifts that made loans to conthe current recession; total loans and leases remains fairly
sumers and firms (but whose loans were not included in
constant until the end of 2008:Q3, when it increases sharply
the H.8 release) have either become commercial banks or
and then declines.
have been acquired by commercial banks. When a comIf our goal is to understand changes in lending dynamics,
particularly over the past few quarters,
do the graph series imply that commercial bank lending increased in the last few
Total Loans and Leases of Commercial Banks
months of 2008 and then bank lending
$ Billions
to the public contracted? Not quite.
8,000
Several reasons suggest reading such
data with extreme care.2
7,000
First, existing loans and leases at each
point in time are equilibrium quantities
6,000
that depend on the interaction between
5,000
the supply and demand of credit. Whether
Other Loans
the observed decrease in the series is
4,000
Real Estate Loans
caused by banks restricting their lending
Consumer Loans
or by borrowers demanding less credit
3,000
Commercial and Industrial Loans
during a major recession remains unclear.
NBER Recessions
2,000
Second, commercial banks are responsible for only a fraction (about 35 percent)
1,000
of financial intermediation in the U.S.
economy.3 The H.8 release does not
0
include the loans of other intermediaries
(thrifts and non-depository institutions);
therefore, just because we do not observe
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Economic SYNOPSES

Federal Reserve Bank of St. Louis

mercial bank acquires a thrift, an insurance company, or
another financial firm, the loans of the target (acquired)
company suddenly appear as additional commercial bank
loans even though no real change in credit took place in
the economy. Many such transactions have occurred since
the crisis began, creating an upward shift to the series that
cannot be interpreted as an increase in lending. (Take, for
example the acquisition of the banking operations of
Washington Mutual by JPMorgan Chase on September 25,
2008.)
Fourth, evidence indicates that firms and individuals
are taking advantage of their previously unused (but committed) bank credit lines, just as they did in previous periods
of credit contraction.5 If banks grant only a handful of new
loans but borrowers continue to draw from existing lines of
credit available at commercial banks, the end result would
appear to be an increase in lending. At the same time,
commercial banks may be withdrawing part of their commitments, which would not be recorded in balance sheet
and H.8 data.
Finally, this series may be affected by the programs
implemented by the Treasury and the Federal Reserve (for

2

example, the Troubled Asset Relief Program or the Term
Auction Facility), and may have been very different without
these interventions.
These caveats indicate that caution is necessary when
making inferences based solely on aggregate loans data. ■
1

The value of loans in the H.8 is a good approximation of aggregate measures
because large banks regularly report their loan status. The 70 banks that comprise
the top percentile of commercial banks based on total assets made up about 73
percent of total loans in 2009:Q1.

2

See Contessi, Silvio and Francis, Johanna L. “U.S. Commercial Bank Lending
through 2008:Q4: New Evidence from Gross Credit Flows.” Working Paper No.
2009-011B, Federal Reserve Bank of St. Louis, April 2009;
http://research.stlouisfed.org/wp/2009/2009-011.pdf.

3 Feldman, Ron and Lueck, Mark. “Are Banks Really Dying This Time? An Update
of Boyd and Gertler.” Federal Reserve Bank of Minneapolis The Region, September
2007, pp. 6-9 and 42-51; www.minneapolisfed.org/pubs/region/07-09/banks.pdf.
4

Duke, Elizabeth A. “Containing the Crisis and Promoting Economic Recovery.”
Presented at Women in Housing and Finance Annual Meeting, June 15, 2009;
www.federalreserve.gov/newsevents/speech/duke20090616a.htm.

5 See Morgan, Donald P. “Bank Credit Commitments: Protection from a Crunch?”
Federal Reserve Bank of Kansas City Economic Review, September/October 1990,
75(5), pp. 51-59;
www.kc.frb.org/PUBLICAT/ECONREV/EconRevArchive/1990/3-4q90morg.pdf.

Posted on August 6, 2009
Views expressed do not necessarily reflect official positions of the Federal Reserve System.

research.stlouisfed.org