It’s human nature for everyone to like to think that they’re right. And part of that is to get news that tells you that what you believe is true. This is often called confirmation bias. And Washington DC is more guilty than most about wanting to believe confirmation bias. Well, one of the publications that does that is an online service called Axios. Axios. is a political broadsheet that everyone who thinks of themselves as part of the beltway cognitive center a Be sure to read. They recently ran a big story called historic credit tightening is occurring.

Well, okay. Why do beltway denizens the animals in the swamp so to speak, want to hear that? Well, they believe that it was banks that caused inflation,

with their reckless lending, that throws them in the same camp of inflation causes like Putin, corporate greed, global warming, what have you, everything is on the list for causing inflation, except for Washington, of course. Then, in addition, the banks through their reckless lending, caused a meltdown back in March, and was only saved by aggressive action by our fearless beltway powerhouses, the Fed and the Treasury.

That’s what we want to believe. So being told that, in fact, we have historic credit tightening going on is a good thing, because it’s going to take care of those banks. Well,

let’s think about that a little bit more carefully. The data that was presented in the article comes from something called the Fed senior loan officer survey.

And the survey says at asked the chief credit officer at the bank, are you tightening lending standards or easing lending standards or leaving them the same? Now, you’re the chief credit officer, and obviously, you’re going to read the financial press. And unless you’re totally clueless, you know, that the Fed is trying to rein in the economy? Well, you know, what you should do? So along comes the Fed in sends you a survey asking you that question, are you tightening or easing credit standards? What do you think your answer should be? Regardless what you’re doing? Of course, you’re going to say tightening, I suppose at least you don’t have to say,

tightening, sir, standing up with a salute. You just have to check the box, but you’re tightening there. That’s the right answer to give your regulator.

But what’s actually happening? Well, the data they show shows tightening lending standards beginning of the start of 2022. And rising very quickly, the overall rise from marine zero to number like 60, the highest on record, it was historic credit tightness, if you believe senior loan officer survey, but what actually happened to lending. Now these senior loan officers are in charge generally of commercial and industrial loans. Well, during 2022 commercial industrial loans, increased 14.3% Despite supposedly record tightening of credit standards, then we had SVB. And they’ve basically been flat since but it wasn’t just commercial industrial loans. Commercial real estate, which we’ve heard a lot of problems about Rose 11.2% and consumer lending Rose 11 and a half percent. All this wall credit standards were supposedly being tightened. Well, you tell the Fed one answer to that survey, and you do what’s profitable. Now, banks did cut one part of their portfolio, government bonds. They kept lending but government bonds are supposed to be risk free. Nonetheless, they cut them 2.7% in 2022, and an annual rate of 5.2% in the first quarter of this year, and an annual rate of 9.6% in the second quarter. It’s government bonds that were too long maturity that were the problem and not the decisions made by the chief credit officers. Their decision

about who to lend to seem to work out quite well. Now, that fact is not reported, because of course the beltway cognitive Sanjay doesn’t want to hear that. They’re the ones who aren’t being lent to not the general commercial and industrial sector. So don’t believe all of your own propaganda. If you’re a policymaker, it’s only going to make your policy, just a repetition of the same old, same old and let’s face it, that hasn’t been working.