(an interoffice email)

A few observations:

1) when chart 1 peaked in 5/01, we still had six months of recession to deal
with and the Fed didn’t stop cutting until 12/01 at 1.75%.
2) data only goes back to 1990, but the 5/90 peak was BEFORE the recession even
started, it didn’t end until 3/91 and the Fed didn’t stop cutting until 8/92 @
3%.
3) EDM9 has two + hikes priced in (three at the recent lows).  the EDZ8 thru
EDU9 part of the eurodollar curve seems awfully cheap to me.
*FED REPORTS NEAR-RECORD PACE OF BANKS TIGHTENING LOAN TERMS
*FED SAYS CONSUMER, BUSINESS LOANS WEAKER FOR PAST THREE MONTHS
*FED SAYS 55% OF BANKS TOUGHENED BUSINESS LENDING SINCE JANUARY
*FED SURVEY GAUGES LENDING POLICY BY 56 U.S., 21 OVERSEAS BANKS
*FED SAYS DEMAND MORE RESTRAINED FOR CONSUMER, BUSINESS LOANS
*FED SENIOR LOAN OFFICERS SURVEY COVERS PAST THREE MONTHS

==============================================================================
April   Jan.   Oct.   July  April   Jan.   Oct.   July
2008   2008   2007   2007   2007   2007   2006   2006
===============================================================================
——————Percentage of Total——————
Large & mid-market      100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Tightened considerably   3.6%   1.8%   1.9%   0.0%   0.0%   0.0%   0.0%   0.0%
Tightened somewhat      51.8%  30.4%  17.3%   9.4%   3.8%   5.3%   7.4%   5.4%
Basically unchanged     44.6%  67.9%  80.8%  88.7%  88.7%  89.5%  85.2%  80.4%
Eased somewhat           0.0%   0.0%   0.0%   1.9%   7.5%   5.3%   7.4%  14.3%
Eased considerably       0.0%   0.0%   0.0%   0.0%   0.0%   0.0%   0.0%   0.0%
——————–Number of Banks——————–
Large & mid-market          56     56     52     53     53     57     54     56
Tightened considerably      2      1      1      0      0      0      0      0
Tightened somewhat         29     17      9      5      2      3      4      3
Basically unchanged        25     38     42     47     47     51     46     45
Eased somewhat              0      0      0      1      4      3      4      8
Eased considerably          0      0      0      0      0      0      0      0
===============================================================================
NOTE: Large and middle-market firms are those with annual sales of $50 million
or more.

SOURCE: Federal Reserve  FRBA <GO>

Thanks,

Don’t forget to add ‘and the economy is improving’ with GDP looking a lot like it bottomed in Q4.

With fiscal adding a quick $170 billion or so of net financial assets/spending power to demand over the next few months watch for additional price pressures across the board.