Nouriel Roubini's Blog has kindly posted a piece by Richard Berner of Morgan Stanley titled "Credit Crunch Watch". Some of the key points from the post:
-"Fed data indicate that delinquencies on non-mortgage consumer loans at commercial banks have risen about 15 bp from their record lows at the end of 2005; most of this is traceable to a rise in credit-card delinquencies of about 60 bp to 4.11% over the same period. S&P data for securitized card portfolios show virtually identical results. This is hardly surprising, given the “adverse selection” in cards resulting from better-quality borrowers switching from credit card into mortgage credit over the past several years."
-"Banks aren’t the primary originators of subprime loans, but the deterioration in subprime mortgage credit quality may have already triggered sharply tighter bank lending standards to individuals, judging by the Fed’s January Senior Loan Officer survey. Sixteen percent of responding banks on net reported tightening lending standards for residential mortgages — the biggest surge since 1990." ---The biggest surge since 1990 sounds like a significant tightening to me.
-"Lenders, understandably against that backdrop, have stopped loosening their lending standards to corporate borrowers, according to the Fed’s Senior Loan Officer Survey."
-(Morgan Stanley) "is expecting chargeoffs to remain flat this year, but loan provisions to rise 30% as falling recoveries spell the end to the long improvement in credit quality."---Has the equity market priced in the expectation of increasing reserves?
-"Even a slight reduction in market liquidity will make it more difficult efficiently to lay off risk, so lending standards will likely tighten further."---That seems like a reasonable statement to me.
There is are a number of other points to chew on in Roubini's post; it's well worth a read.