Charts That Should Scare The Pants Off The Fed (And Probably Do)

Let's investigate the relationship between the Fed's QE program, bank lending, and alleged stockpiling of cash.

Fed's Balance Sheet, Bank Deposits, Bank Loans 2021-05

In an effort to stimulate bank lending and thus the economy, the Fed launched amassive QE program that lowered interest rates and crammed money into banks.  

Let's take a look at some numbers.

January 1973 Numbers

  • Commercial and Industrial Loans: $135 Million
  • Fed's Balance Sheet: $0
  • Bank Deposits: $599 Million 
  • Bank Loans and Leases: $405 Million

May 2021 Numbers

  • Commercial and Industrial Loans: $2.547 Trillion
  • Fed's Balance Sheet: $7.867 Trillion
  • Bank Deposits: $17.079 Trillion
  • Bank Loans and Leases: $10.342 Trillion

Commercial and Industrial Loans, Bank Deposits, Bank Loans and Leases Percent Changes

Bank Deposits and Loand Percent Change 2021-05

Year-over-year commercial and industrial loans are down 16.22%, loans and leases are down 4.53%, and deposits are up 11.57%.

The last time year-over-year commercial loans and loans and leases were negative for two consecutive months (as they are now) was August 2010. 

However, these are distorted figures. 

Notice the big 30% year-over-year spike in commercial and industrial loans in May of 2020. Year-over-year loans and leases also surged 11.12%. Those surges were artificial and related to government programs and guarantees. 

The best way of looking at things is a month-by-month take since the beginning of the recession.

 Loans, Bank Deposits, and the Fed's Balance Sheet Details

Fed's Balance Sheet, Bank Deposits, Bank Loans Detail 2021-05

Since May of 2020, bank loans and leases, and commercial loans have shrunk in a continuous fashion. Both are barely above where they were pre-Covid-19.

Pre-Covid-19 to May of 2021

  • Bank Deposits: +3.7 Trillion 
  • Fed's Balance Sheet: +3.7 trillion
  • Bank Loans and Leases: +0.3 Trillion
  • Commercial and Industrial Loans: +0.2 Trillion

Is this all we get out of expansion of the Fed's balance sheet by $3.7 trillion, from $13.4 trillion to $17.1 trillion coupled with trillions of dollars of stimulus from Congress?

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