US bank lending drops by record amount after SVB collapse

U.S. bank lending dropped by nearly $105 billion during the last two weeks of March, the largest on record, indicating that financial institutions are tightening credit conditions following multiple high-profile bank collapses.

Commercial bank lending plummeted nearly $105 billion in the two weeks before March 29, with a $45 billion decrease in the last week alone, according to Federal Reserve data reported by Bloomberg on Friday.

[This isn’t a surprise — it’s exactly what Jerome Powell wants. The upside of this is that the Fed may be able to pause its interest rate hikes and avoid further destabilization of the capitalization of smaller banks. The downside is that this sudden contraction in lending almost guarantees a recession, sooner rather than later. — Ed]