Jim Jubak: Rising Loan Provisioning May Tighten Credit in 2006
MSN Money - Do-nothing Fed is dangerously disengaged - Jubak's Journal: "
Talk is cheap, Mr. Greenspan.
But when it comes to bubbles and potential bubbles, that's all we get from the U.S. Federal Reserve. Greenspan and company can sure talk the talk. But walk the walk? Forget about it.
And I think that's going to get us -- and Alan Greenspan's successor as Federal Reserve chairman, come January -- in trouble. Again. In 2006, I'd estimate.
...
It's reasonable to conclude that with loan payments going up for some borrowers at least, the rate of loan delinquencies and defaults, now near historic lows, will start to move up, too.
It's in the banks' self-interest to look backward at declining loan-default rates and justify releasing more reserves. But the Federal Reserve is supposed to look forward and make sure that the financial system is ready for the turn in the cycle. Besides jawboning borrowers into borrowing less cheap money, the Federal Reserve could be pressuring banks to stop lowering reserves, at worst, and, at best, to start raising them. That would better prepare the banks for the turn in the credit cycle that continued short-term interest rate hikes from the Fed will create."
Talk is cheap, Mr. Greenspan.
But when it comes to bubbles and potential bubbles, that's all we get from the U.S. Federal Reserve. Greenspan and company can sure talk the talk. But walk the walk? Forget about it.
And I think that's going to get us -- and Alan Greenspan's successor as Federal Reserve chairman, come January -- in trouble. Again. In 2006, I'd estimate.
...
It's reasonable to conclude that with loan payments going up for some borrowers at least, the rate of loan delinquencies and defaults, now near historic lows, will start to move up, too.
It's in the banks' self-interest to look backward at declining loan-default rates and justify releasing more reserves. But the Federal Reserve is supposed to look forward and make sure that the financial system is ready for the turn in the cycle. Besides jawboning borrowers into borrowing less cheap money, the Federal Reserve could be pressuring banks to stop lowering reserves, at worst, and, at best, to start raising them. That would better prepare the banks for the turn in the credit cycle that continued short-term interest rate hikes from the Fed will create."
posted by HeraclitusO at 8:41 am
<< Home