Roughly two months ago, when we compared the loan data released by America’s largest, TBTF banks, and what the Fed’s own commercial bank data revealed in its weekly H.8 statement, we asked a simple question: “Is The Fed Fabricating Loan Creation Data?” Visually, the discrepancy was shown as follows:
Our summary then:
Is the Fed fabricating loan level data? Or, less dramatically, is the Fed merely once again goal-seeking its weekly “data” to account for a world in which deposit expansion is no longer running at the pace seen in pre-taper days.  It would be logical that the one “plug” the Fed would adjust to balance off its model is to boost lending activity, which would explain why the Fed is suggesting lending is surging.
Unfortunately, lending is not only not surging, it is contracting, if only among the Big 4 banks in the first quarter.
So whether the Fed has an ulterior motive, or is simply fudging for a lowered Fed reserve creation growth trendline, we believe the people deserve an answer: just what is really going on here?
Why is this data so important? Because absent a pick up in commercial bank lending, which should eventually match and surpass the amount of bank “assets” created by the Fed’s QE (which in 2013 amounted to $255 billion per quarter), then bank liabilities can’t grow nearly as fast, and as we showed earlier this week, neither can US GDP which is earlier this week, to the amount of commercial bank liabilities in circulation.
In other words, more than anything else, it is loan creation – i.e., money creation in its conventional pathway, via commercial banks not via the mutant, aborted process in which the Fed creates money only to ramp asset values – that is so critical for real, not artificial, not manipulated, US economic growth.
So did we make up our allegation, and did we simply dream up the data that we showed above?
Well, no. At least not according to one of America’s largest banks: Bank of America. As BofA’s Michelle Mayer admits, looking at C&I loan data – both that sourced directly by BofA, and by the Fed’s own call reports, while “the outstanding level of commercial and industrial BAC loans has been growing at a fairly steady pace for the past three years”… “there was acceleration into 2013, but the last few months show some slowing, consistent with the weakness in capex spending. The Federal Reserve data are more volatile, showing both a bigger slowdown last year and a bigger pickup recently.”Â
