Ch#6 Consumer Credit Flashcards
What is Consumer Credit
Federal Reserve Board’s consumer credit release details the amount of installment credit that individuals (consumers) have outstanding. It is defined as a lon that is scheduled to be repaid in two or more installments. It does not include mortgage debt or any other loan secured by real estate
Consumer Credit
Market Significance+ Low
Typical Release Time+ 2:00 PM EST Fifth Business Day of the Month
Released By+ Federal Reserve
Month Covered+ Two Months Prior
How many Different Types Is it broken down into
Three types of credit and by the type of institution holding the debt.
1 Automobile Credit
2 Revolving Credit
3 All Other. Included in the last category (but not restricted to) are mobile home loans, education loans, and vacation loans.
For 1992, it was 35% 34% 31%
Types of Holders
Commercials banks to retailers to gasoline companies and pools of securitized assets. in the 1980’s, there was tremendous growth in the packaging of credit card debt and automobile debt and selling the sum total as a single collateralized security. When this was done, the debt was taken off the institution’s books.
How analyze
It is released really late. An upturn in spending growth typically will be accompanied by a consequent or subsequent upturn in consumer credit. Consumer credit merely validates spending trends; it doesn’t reveal new ones. Missed 2 big events
Problem with Consumer Installment Credit Data
Exclusion (deny) of credit secured by real estate0 the key issue being home equity loans. tax law changes in the 1980’s, which denied tax deductions for nonreal estate interest payments, have pushed consumers to pay down revolving credit outstanding and to “refinance” it with home equity loans, the interest on which is tax deductible.
How are Home Equity Loans used
It’s an effective way to finance an automobile purchase. With this and the previous installment credit absent from Consumer Credit Series, a misleading picture is painted.
