Lending to consumers has steadily increased since the credit crisis and has continued since the November elections.
Lending to companies has stalled since the elections.
Yesterday The Fed raised ST interest rates and indicated there are more to come despite the conflicting data about credit expansion.
Smart move? Yes . . . as there are logical explanations explaining the leveling out of corporate borrowing.
On the corporate side:
- Companies are waiting on clarity around tax reform as there’s an expectation for less favorable treatment of interest expense.
- Companies are delaying investment as there’s an expectation for more favorable amortization rules.
On the banking side:
- Banks are tightening lending standards on concerns about leverage in the corporate sector. Much of the stock market gains over the past few years was driven by financial engineering – borrowing on the cheap to repurchase stock.
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