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Deleveraging in action, Bank of England edition


Ever since branches started forming outside Northern Rock branches two years ago, British consumers have been told they have way too much debt. They finally appear to be paying attention. Bank of England data released today shows net lending to individuals fell by £600m between June and July. Nothing surprising there, you might say. Surely it’s only normal that people are paying back their debts. Except that this is the first drop since the Bank started recording monthly data back in 1993. Or, as the Bank’s statisticians put it:

Total net lending to individuals fell by £0.6 billion in July, showing a net repayment for the first time in the series.

For most of the past two years, the net lending figures have been falling. But they had not turned negative, until now. The question is whether this is a one-month blip or the beginning of a trend. Certainly, the drop in mortgage lending is at odds with other recent figures. Also in July, according to the British Bankers Association, the number of mortgage applications that have been approved rose to their highest level for a year and a half. The question is whether those new borrowers will compensate for the people who have decided it is high time they paid off some debt. Watch this space.

Could Goldman pinch CIT?


It appears the federal government is on the verge of walking away from CIT Group and the same can be said for Goldman Sachs–even though the investment firm is one of the mid-market lender’s biggest bankers.

On Monday, I suggested that Goldman CEO Lloyd Blankfein could turn around the public’s nasty impression of his Wall Street firm by stepping in an buying-out CIT. But I didn’t really expect it to happen. Then yesterday there was a rumor floating around that Goldman, with the tacit support of the Obama administration, was trying to put together a private-sector bailout package for CIT.

CIT is a warning sign


agnes1If it’s not a risk to the financial system, let it fail.

That’s the message from the government’s reluctance to swoop in and bail out one of the nation’s biggest commercial lenders, CIT Group Inc, as it struggles to stay afloat. But even though CIT doesn’t have the firepower to take down the global financial system, its failure would certainly be felt by some of the struggling small businesses that rely on its financing.

CIT is negotiating with its regulators to find a solution to its near-term liquidity problems, but speculation that it will file for bankruptcy has intensified after the Wall Street Journal reported that it was preparing for a possible filing.