Yahoo Finance’s Brian Cheung joins Zack Guzman to discuss why U.S. bank loans have dropped 4% excluding PPP in Q2, according to new analysis from S&P Global.
ZACK GUZMAN: Also we're taking note at the banking activity. We've been discussing this on the ticker for the past week here. Noting some weakness in loan activity, down 4% according to a new report from S&P Global Market Intelligence. In fact, only one of the top 10 banks there by total assets experienced non-PPP loan growth on a QOQ basis. And for more on that, I want to bring on Yahoo Finance's Brian Cheung who has the details. And Brian, you might not expect that considering all the efforts put into this to make banks more willing to loan right now.
BRIAN CHEUNG: Well that's exactly it. And the Federal Reserve's actions have been in addition to broad opinions from policymakers on-- on Capitol Hill is for the banks to be doing lending to support the economy during these times. But as we saw from the data as you mentioned from S&P Global Market Intelligence, not necessarily the case that the largest banks were increasing loans when you look at the aggregate. Showing a quarterly decline of 4.1% in total loans and leases. This is covering both commercial loans to businesses, in addition to household loans, to people with credit cards and mortgages, for example.
That is controlling for the $481 billion in Paycheck Protection Program loans. Obviously that had been a large part of lending from these banks over the past quarter and a half or so. If you strip that out, again, the underlying performance here of these large banks not necessarily showing more lending. Now there's a number of reasons for this. It's not necessarily that the banks themselves are holding back on credit, even though the FED surveys did show that there has been some pullback in the tightening standards for loans here. But it's also on the demand side. Think about the fact that consumers have been paying down debt.
We saw that as the result of a New York FED survey that we discussed here on "The Ticker" about a week or so ago in addition to business borrowers just not wanting to get more levered or take any sort of loans out with so much uncertainty about the future. So not necessarily a surprise that the loan volume isn't increasing so much now. The question is, when will it?
ZACK GUZMAN: Yeah. We'll wait to see how that plays out. But on the political front here there's a couple of things to note. I think right now the most exciting thing I've seen, you know that I love me and myself some Janet Yellen, but Joe Biden announcing that she will be joining her-- or his, rather, economic team here for a FED chair in Janet Yellen. What does that do to kind of bolster maybe some of the thinking that we've seen out of the Democratic side here in this hotly contested election?
BRIAN CHEUNG: Well Zack, you ruined the surprise. We were teasing it before the break of who it's going to be. You just dropped the bomb there. It's Janet Yellen.
ZACK GUZMAN: Stealing your thunder.
BRIAN CHEUNG: I know, right? Well regardless now, it's-- the cat's out of the bag. So it was Janet Yellen who was advising the Biden Campaign in a briefing yesterday. Now Yellen wasn't the only one in the room. It also included Harvard University professor Raj Chetty, University of Michigan Professor Lisa Cook, in addition to another policy advisor to Biden, Jake Sullivan. There was also Heather Boushey and Jared Bernstein in that meeting, as well, and a number of high profile economists. Now this briefing, we don't exactly know what the details of it were.
But obviously, given the hole that the United States finds itself in headed into this election, Biden trying to look for some help in terms of trying to engineer some sort of plan to put on his pedestal once the voters do end up going to the polls in November. So definitely something worth watching there. I want to know, however, that just because Yellen was briefing Biden and now Harris, it doesn't necessarily mean that she's part of the economic team that Biden has put together.
That is the case for Heather Boushey, again, from the Washington Center for Equitable Growth and Jared Bernstein from the Center on Budget and Policy Priorities. Those two individuals are formal members of the Biden Campaign. But Yellen, Chetty, Cook were just kind of invited to the meeting. So a little bit too soon to be speculating over a whether or not Yellen will join the team and then obviously, secondly, if she would be considered maybe for a FED position if Biden were to win the election. A lot of speculation, though, should be expected as we get a little bit closer to that November date.
Because as we know, people do love speculating about who these nominees might be under possible new administrations. Zack.
ZACK GUZMAN: Advising, you know, you want to say that they're on the team. But advising roles, as you note, they're not necessarily official. It's worth noting, I think, that Yellen used to serve as the chair of the White House Council of Economic Advisors under Clinton back in '97 to '99. So she has some tenure there under Democratic presidents. We'll see what happens on that front. Brian Cheung, appreciate you bringing us that.