Revolving Credit Finally Turns Up - Maybe

by: Tom Lindmark

Jake at EconompicData.com published this yesterday (you can click on it for a larger image).


Click to enlarge

Notice the tiny little blip at the bottom of the blue line. It actually represents an uptick in revolving credit — think credit cards. Now if you visit the Fed’s site, which has all the details, you will learn that revolving credit actually declined at an annual rate of 2.75% in 2010 but it did pop up 3.5% in December.

About the most you can make of that is that consumers were a little more willing to put their Christmas purchases on plastic this year and, as we know, they bought more stuff during the holidays. It remains to be seen if they pay the balances down or if this represents a new round of leveraging.

There are a couple of other interesting data points on the Fed’s site. Notice that banks holdings of revolving debt increased dramatically — from $362 billion in 2009 to $617 billion in 2010 while revolving credit actually declined overall. Why did it go up so much? Simply because the securitization market tanked. Pools of securitized assets declined from $402 billion to $46 billion. The banks are holding all of the risk assets on their books.

The other point is one I’ve noted before. The federal government is quickly becoming one of the big players in nonrevolving credit. It owned $317 billion at the end of 2010 up from $186 billion in 2009. This is pretty much all student loans. A mini-Frannie disaster in the making? We shall see.