I created the above chart from the New York Fed Survey of Consumer Expectations for March. 

Credit Survey Key Points 

• Credit access perceptions deteriorated in March. 
• A record high 58.22 percent of consumers said that it was harder to obtain credit than a year ago.
• In February, a record low 7.47 percent of consumers said that it was easier to obtain credit than a year ago. 
• For March, 8.63 percent of consumers said that it was easier to obtain credit than a year ago. That's the third lowest total. The second lowest was 7.77 percent in December of 2022.

Largest pullback in U.S. bank lending..on record. 🚨🚨🚨

Sam Zell once said: “You can have all of the assets in the world you want, but if you have no liquidity it doesn’t matter.” “Liquidity equals value”@DiMartinoBooth pic.twitter.com/OH7epoooyZ

— Ben Pouladian (@benitoz) April 9, 2023

Largest Pullback on Record

What's Going On?

• The inverted yield curve and QT act to restrict lending
• Banks are fearful of a recession and credit losses
• All the banks that leveraged into duration are suffering mark-to-market losses on their Treasury and MBS portfolios. The banks know this (and knew this even before Silicon Valley Bank was taken over). 

Back in his November 2 presser, Powell was asked about the inverted curve.

He essentially answered, "Nothing to see here. The curve we watch is not inverted."
---
From the presser transcripthttps://t.co/Xc1Cle0tdm

POWELL: Well, so we do monitor the near-term forward spread,… pic.twitter.com/flH3EmBf4q

— Jim Bianco biancoresearch.eth (@biancoresearch) April 10, 2023

Recessionary Credit Crunch Is Now Unavoidable 

Bank lending will drop 5-7% based on reported lending standards.

A recessionary credit crunch is now unavoidable https://t.co/mG96BQzMls pic.twitter.com/Z725N5e3vu

— AndreasStenoLarsen (@AndreasSteno) April 10, 2023

The Fed is OK with this development and will be until there are more bank failures. 

All the Fed has is blunt tools. Tightening credit to cause a recession is the Fed's primary blunt tool.

The Fed Models the Weather Although It Can't Even Stress Test Treasuries

Despite failing to see the demise of three banks this year, the Fed is now into climate stress testing with laughable results.

For discussion, please see The Fed Models the Weather Although It Can't Even Stress Test Treasuries

More By This Author: