Things that make you go hmmmm…
I've talked about the credit market and how important it is to the economy (telling you something that precisely all of you already know). It really may be the best indicator of where the economy is headed. The stock market is volatile, consumer sentiment can be irrational or irritable (I say that as a sometimes irrational or irritable consumer). Jobs and wage growth matter, but who really lives off just their paycheck? Nobody I know. Most people need credit in one form or another to survive.
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Credit, therefore, is paramount.
Banks have been socking away a bit more lately to cover bad debts, but in general credit conditions at the banks look good, our John Reosti writes this morning. Loan loss provisions have been growing, but as much because banks are just trying to anticipate a reversion to the mean as because they see problems in the economy.
In other words, credit conditions have been great, a bright spot in fact, John writes. What's prompting bank executives to put aside more money to cover bad loans is just the expectation that at some point the cycle will turn.
Their prudence is warranted. Yes, things look good right now. The New York Fed, for instance, reported in its most recent report on household debt that delinquency rates were steady. That report came out just over a week ago – but covers the first quarter. In other words, it largely does not reflect any conditions since the Iran war started. The Consumer Financial Protection Bureau publishes mortgage-delinquency data, but the April update of the data covered mortgages through September 2025.
Conditions may be changing, though. There may be a surge of foreclosures given the FHA ended a pandemic-era relief policy. Student-loan delinquencies are rising. The spring home-sales season was a bust. In other words, a lot of the public data is dated. You know who has really, really, super duper up-to-date data? Banks. And they are adding to their rainy-day funds. Hmmm.
AI and finances
I wrote yesterday about the partnership between the fintech Plaid and OpenAI, which would allow ChatGPT Pro users the ability to share their financial data with the AI platform. I wrote that I questioned this arrangement. I wrote that I didn't know if OpenAI could be trusted with such sensitive material.
I am not alone.
Our John Adams had a story yesterday about how AI is being used both by criminals to commit crimes, and by banks and other financial-services firms to fight those crimes. (Relatedly, our Penny Crosman has a story about how crypto firms are using AI to fight crime as well.) The story talks mainly about the threat of AI-enabled crime, and how the banks are recognizing it and responding to it. But one small tidbit in the story landed with me:
"Consumers are also not comfortable using AI for payments — Nuvei reports only 19% of consumers are willing to allow AI to complete a payment on their behalf."
Nuvei is a Canadian payment processor, and apparently they survey their customers. And the vast majority of their customers said they are wary about using AI. If this report is at all indicative, Plaid and OpenAI could have a hard time with their partnership. If 80% of your potential market is giving your product the side-eye, you're in trouble.
