The latest quarterly credit report from the NY Fed shows continued de-leveraging at the consumer level.  The consumer credit recession continues unabated.  Highlights from the report are attached (via NY Fed):

“Aggregate consumer debt fell approximately $60 billion to $11.66 trillion in the third quarter of 2011 according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit. Total consumer indebtedness decreased roughly 0.6 percent from revised second quarter findings of $11.72 trillion.1 The newly issued report also presents information on various aspects of consumer debt, including continuing and emerging trends for mortgage balances, delinquencies, foreclosures and other consumer credit activity.

“The decline in outstanding consumer debt reveals that households continue to try and deleverage in the wake of a challenging economic environment and large declines in home values,” said Andrew Haughwout, vice president in the Research and Statistics Group at the New York Fed. “However, our findings also provide evidence that consumer credit demand continues to increase, a positive sign for consumer sentiment.”

Highlights from the report include:

  • Mortgage balances on consumer credit reports fell by approximately $114 billion or 1.3 percent over the third quarter while home equity lines of credit balances increased by roughly $14 billion or 2.3 percent.
  • Non-real estate indebtedness now stands at $2.62 trillion, about 1.3 percent above its Q2 level.
  • Aggregate credit card limits declined by about $25 billion slightly offsetting increases from earlier this year.
    • Open credit card accounts declined by 6 million to 383 million in the third quarter and credit card borrowing limits fell again, partially offsetting some gains seen earlier in the year.
    • Open credit card accounts for third quarter were approximately 23 percent below the peak in second quarter 2008 and balances on those cards were nearly 20 percent below their highest levels in fourth quarter 2008.
    • Credit account inquiries within six months, an indicator of consumer credit demand, increased for the second quarter in a row.
  • Overall delinquency rates increased to 10 percent as of the end of September, compared with 9.8 percent at the end of June.
    • Approximately $1.2 trillion of consumer debt is delinquent with $834 billion being seriously delinquent (more than 90 days).
    • About 2.5 percent of current mortgage balances transitioned into delinquency in the third quarter, reversing a recent trend of reductions in this measure.
  • New foreclosures decreased 7 percent quarter over quarter and bankruptcies declined
    18.8 percent year over year.”
You can also download the full report here.

Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Vol Trader

    Cullen, this looks like it’s mostly housing related. What’s your latest outlook for housing?

  • Texan

    If my calculations are correct, the debt/income ratio has fallen all the way down to 101% from 130% in 3Q 07.

    Numbers I used:

    3Q-aggregate consumer debt 11,660 billion
    3Q-disposable personal income 11,565 billion

    In the 90’s the debt/income ratio was around 85%. At the rate it’s falling, it could be two more years of deleveraging to reach those levels but……this rate of deleveraging happened during government stimulus.

  • troll


  • MG

    How does one explain the success – for the retailers – of Black Friday and Cyber Monday?

    If the consumer is still deleveraging, where is the spending money for consumers coming from?


  • Trixie

    That’s old news, isn’t it? In fact, I think it’s much more than that. Honestly, I’ve become desensitized to all of by now. Dare I even say bored?

  • TheArmoTrader

    Cullen (or anybody else), What would be an ideal level for debt to come down to? As Texan noted, Debt/income ratio is at 101%. What would be ideal before we can claim the balance sheet recession to be over?

  • Robert Rice

    I don’t think this question needs answering in quantitative terms (although the answer would be interesting). Think qualitatively; as debt is paid down, income is freed up for demand creation. As enough debt is paid down, signs of recovery will emerge (e.g. increased demand, increased business revenues, reduction in unemployment, etc.).

    If the government isn’t going to provide anymore stimulus, the only way forward is through the painstakingly slow process of debt reduction. Without appropriate government intervention we are years away from sufficient income being freed up to bring us back near full production. We’re talking 11.66 trillion in debt being paid down at the tune of 100 billion per quarter (if that). 11.66 trillion is a lot of 100 billion quarters.

  • Wulfram

    An ideal DTI ratio (other than 0) is hard to come by.

    I think the job market has been altered by technology, demographic trends, globalization, over-financialization, energy scarcity. Since government response has been to ignore or exacerbate these causes, the DTI level that can be sustained has been fundamentally altered.

    Realistically, we’re looking at a short-medium term future where wage growth is muted, job security lessened with layoffs and temporary contract jobs becoming more common.

    More troubling, we’ve also shifted our debt burden to student loans while trying to prop up home values. This will further impact demographics negatively — leading to a drag on growth for years to come. I, however, do think we’re “only” 2-4 years away from the end of the BSR, although growth will be muted for years to come.

    Despite these negative conditions, we’re also going to remain the wealthiest, most creative nation on the Earth baring alien intervention, so don’t go hiding under a rock just yet.

  • I’llHaveADouble

    The number’s a bit specious, too, and seems to be misleading in the way it’s used. It makes people think financial institutions (and some clever lucky duckies) received trillions free and clear. Rather, they received loans and credit lines, guarantees.

    Not that people shouldn’t be mad that finance was saved while everyone else got a measly $800 billion over a couple of years, but it was basically just the Fed doing one of central banking’s oldest jobs: being the lender of last resort. They should be more ticked that finance hasn’t been keeping up its end of the bargain*, namely borrowing more cheaply than anyone else and expertly lending to the most profitable endeavours.


  • I’llHaveADouble

    No one said they’re deleveraging by saving all of their income.

  • daniel

    As debt is paid down the economy contracts. In this fractional reserve system more debt creates more money which creates more deposits and even more debt. So if debt gets paid off there should be less money out there for deposits and further demand created through greater loans. Supposedly this is how the system works.

    We need to create a non debt based system that doesnt need excesive debt taking to grow. Debt isnt all bad but neither should it be the foundation of the economy.

  • http://binaryoptiontutor.wordpress.com/ Options Trader

    That’s a great question, but I don’t think debt/income is a apples to apples measure. A better ratio would be debt / asset levels on the Real Estate. That is the measure that matters – how fluid can the RE market be / how easily can people make home / life / location changes. Given that dreadful number of homes underwater financially in the south and southwest I would continue to expect housing to be a drag on the economy for both liquidity AND mobility reasons.

  • troll

    Excuse me, but if this such blase stuff, why did it take a lawsuit by Bloomberg’s under the FOIA to get this inrofmation released? (3 years after the fact?)
    I may be an economic ignoramus, but after watching human behaviour for 60 years, methinks something is rotten in the FED.

  • I’llHaveADouble

    Weren’t the scale of the special facilities operations already well-known, though?

    I’m not saying it’s not screwed up, and any degree of opaqueness about the activities is almost certainly unjustified – according to theory (whatever that’s worth), we want as much accurate information publicly available as is humanly possible. But the Fed’s not the root problem here, and there’s no evidence that it’s the frightening cabal that it’s frequently made out to be. Financial institutions get sweetheart deals on cash compared to everyone else, but that’s because they’re supposed to be performing a quasi-public function. The scandal is that they haven’t been doing that. The problem is the private sector.

    Here’s a truly damning criticism of the Fed: it was thoroughly incompetent in its regulatory function.

  • El Viejo

    I have to wonder how much of that mortgage debt was actually paid off.

  • troll

    This just may be another example of my ignorance but, no, I was not aware of the scale. Was anybody else? (besides I’ll Have a Double)

  • Don Levit

    For the next quarter, wouldn’t the increase in interest offset the decrease in principal?
    Don Levit

  • Dunce Cap Aficionado

    A) Glad they have student loans in there finally… the fact that they currently outwiegh CC debt should put it in perspective.

    B) Speaking of perspective, anyone know what that orange stuff is? Is that important? Is it somehow affecting the current and ongoing state of the economy?

  • Trixie

    LOLR? Sure I get that and recognize the Fed’s unlimited capacity to act as such. I actually wasn’t against the bank bailouts (I don’t have the appetite for crisis), but I assumed the trade-off would have been to actually fix the problem. IE, bust up the banks and put them in chains. Instead the same people stayed in charge (receiving massive bonuses along the way) and the banks got even bigger.

    In a single day, the Fed backstopped the banks to the tune of $1T, yet when Social Security falls short by that same amount in a couple of decades, all of a sudden “we’re broke”. Because of school teachers, the poor, and the elderly. And let’s not forget defunding NPR and Planned Parenthood will balance the budget. All in the name of “shared” sacrifice. Meanwhile the bankers are laughing at us.

  • Dunce Cap Aficionado


    I agree it should be 100% transparent. But I also understand why, say, the FED would not want it to be transparent. Nothing Machiavellian, but just look at the misconceptions of other Fed actions. QE had people calling for Bernanke’s head. So to provied 100% transparency would look like, to some people, throwing gasoline on the fire.


  • BarbaraNH

    Wow, we have a long way to go.

    Australian economist Steve Keen was apparently able to foresee the current recession from the increasing ratio of private debt to GDP, which he apparently studies. Here’s a link:


  • I’llHaveADouble

    I thought aggregate loan information was released pretty regularly for all facilities?

    But yeah, all things considered, they should have sent us some damn checks in the mail.

  • Texan

    Even if people can’t sell and move because they are underwater, they can eventually allocate more money toward spending vs debt reduction. At what level of debt will this happen?

  • Texan

    Since money can go towards savings, spending, or debt we can pay down debt and spend more at the same time by saving less.

    Besides the debt/income ratio, the other two pieces of data I track are the savings rate and the DSR (Debt Service Ratio). The savings rate has declined recently, so more money seems to have been spent on goods and services. The DSR tells how much money is spent monthly on debt service. This ratio has been declining too. Lower interest rates have allowed people to have a lower monthly debt service, freeing money to spend or save. As Americans, any extra money we have….we spend!

    The trick is in forecasting where these ratios will go next.

  • Texan

    This is what I have been wondering too.

    If so much of our growth over the last 30 years was due to debt (public and private), then when debt/income falls to, say, 90 will we grow again by pushing that ratio back up? Will we still be shell shocked like the generation that lived through the Depression and save everything we can. My great grandmother saved every bit of leftovers when she would eat out. Supposedly a habit she learned from the 30’s. She still did this in the early 90’s. Wait, we won’t get that bad. We’re too damn spoiled!

    I think we will take after Japan, but Japan in fast forward. Maybe not slow growth for 2 decades but at least 1. That takes us to 2017.

  • MG


    Thanks for the explanation.
    I’m a simpleton..as you can see…..MG

  • TheArmoTrader

    Thanks for the response Robert. Your answer makes a lot of sense MMT-wise. As Cullen always says, there is no “exact perfect #” for spending and taxes. Its a go-with-the-flow type answer here. Totally makes sense.