As policymakers moved on several fronts to stabilize credit markets in recent months, one challenge has been identifying the right lever to pull.
Policy decisions have been complicated not just by the breadth of the pullback in lending — the interbank market providing perhaps the most dramatic example — but also the conflicting metrics reported by individual institutions.
Thus, a recent report sliced Federal Reserve Board data to suggest that bank lending actually notched a big increase in 2008 — and added to an already complicated debate.
Though most agree there is certainly enough noise around any individual number to make drawing general conclusions at this point hazardous, there also seems to be a sense that the data indicate regulatory moves to free up credit are having at least some of the effects policymakers intended.
Celent, the Boston-based financial research arm of Marsh & McLennan Cos. Inc., in a report last week said Fed data shows loan growth in the interbank market, as well as an increase in bank loans to companies and consumers in 2008.
The report asserts that the growth came despite the dismal outlook painted by Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson during the past three months as they championed programs to pump billions of dollars into banks to free up what they have called a clogged credit system. But some argue that Celent's findings simply validate certain of the programs pushed by regulators, such as the Federal Deposit Insurance Corp.'s move to guarantee certain kinds of interbank lending.
James Dimon, the chief executive of JPMorgan Chase & Co., said last week that the New York company had increased its interbank lending, as well as loans to companies and consumers, in recent months. "We continue to grow," Mr. Dimon told CNBC. JPMorgan Chase has increased interbank lending to $60 billion from roughly $5 billion before Lehman Brothers Holdings Inc. went bankrupt in September, he said. Mr. Dimon cited the Treasury' Department's move to inject billions of dollars directly into dozens of banks for helping boost lending by JPMorgan Chase and possibly by other banks.
Celent's report, meanwhile, noted that volume on the interbank market, an area of particular concern for federal officials, hit an all-time high in September.
However, others said they expect lending to taper off this quarter and into early next year.
"The idea that there is no credit crunch is completely contradicted by a wide variety of evidence and by what the credit spreads are showing. Libor is still 2 percentage points above the comparable-maturity Treasury bill rates. Usually is it 0.25% to 0.5% above," Dana Johnson, the chief economist at Comerica Inc., said in an interview last week.
"In nooks and crannies loans are growing … , but there has been a tremendous slowing in the growth of credit and a tremendous increase in the spreads when they are being forced to borrow," he said.
The Celent report says both commercial and consumer lending have grown in the past 18 months and that each recently hit record levels — consumer in September and commercial in October — the most recent months for which federal data are available.
And companies like Wells Fargo & Co. in San Francisco appear to back up those findings. "Since the start of the credit contraction over a year ago we've been open for business for our creditworthy customers," Wells spokeswoman Julia Tunis Bernard said Monday. "At the end of the third quarter, our average loans were up 15% from the previous year and 13% annualized from the previous quarter."
But even as banks may be adding loans, many balance sheets remain laden with bad credits.
"There are still a bunch of bad assets out there," Robert B. Albertson, the chief strategist at Sandler O'Neill & Partners LP, said in an interview last week. "Banks' ability to sell anything into the secondary market — that's the real problem."
Mr. Albertson said he believes that the Treasury should have stuck with the original plan for its $700 billion Troubled Assets Relief Program: buying up hard-to-move mortgage-backed assets that are weighing heavily on many banks' balance sheets.
Both the Treasury and the Federal Reserve declined to comment for this story.
Anthony Davis, an analyst at Stifel, Nicolaus & Co. Inc., said that, though some of the steps taken by policymakers "have likely helped," more is needed. "Banks have really tightened underwriting standards, and access to credit is not what it was," he said in a recent interview. "And the growth in loans, while up for the year, is clearly weakening in November."