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Consumer borrowing up $37B at CUs in November

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WASHINGTON (1/9/13)--Consumer borrowing during November rose a seasonally adjusted 7% to nearly $2.769 trillion, announced the Federal Reserve Tuesday. Members' borrowing from credit unions was up $3.7 billion for the month--to $242.5 billion.

November's $16.05 billion increase in the overall debt was the fourth consecutive monthly increase, said the Fed's Consumer Credit report. Economists polled by Reuters had forecast a $12.75 billion hike in November, while those polled by Bloomberg had forecast a $12.8 billion rise ( and Jan. 8).

November's figures follow a slightly revised to 6.2% or a $14.08 billion rise during October, said the report. October's total debt was more than $2.752 trillion, compared with nearly $2.632 trillion at the end of 2011.

At credit unions, consumers' debt increased from October's $238.8 billion. November's figure was also $19.5 billion greater than the $223 billion members borrowed from credit unions during fourth quarter 2011.

(Editor's note: For a more detailed look at credit unions' lending in November, check the Credit Union National Association's Monthly Credit Union Estimates at the link.)

Non-revolving credit, which includes auto and student loans, rose 9.5%, accounting for nearly all of November's increase in consumer debt. Consumers borrowed slightly more than $1.91 trillion in these loans during November, compared with nearly $1.895 trillion in October and $1.78 trillion in fourth quarter 2011.

For credit unions, nonrevolving credit in November totaled $202.6 billion. That amounts to a $1 million increase from the $202.5 billion they loaned to members in October, and a $17 million increase from $185.1 billion loaned at the end of 2011.

November's revolving credit--largely credit card debt--also rose, at an annual rate of 1% to $834.3 billion. That compares with  more than $823.8 billion borrowed  in October and $851.4 billion at the end of 2011.

Credit union members' revolving credit totaled $39.9 billion, an increase from $38.2 billion in October and a $37.9 billion at the end of 2011.

The Fed's report does not track debt related to real estate, such as mortgages and home equity lines of credit.

Market News (01/09/2013)

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MADISON, Wis. (1/9/13)

  • U.S. small-business sentiment slightly improved in December, but is only marginally higher than November's reading, which was the lowest reading since 2009 of the National Federation of Independent Business (NFIB) Small Business Optimism Index (Moody's Jan. 8). The composite index inched up to 88 last month from 87.5 in November. Earnings still are down, resulting in small companies reducing hiring and investment plans, NFIB said. Also, many small firms intend to let inventories decrease--an indication that future business expectations are soft, NFIB said. Small companies will see tough times in the next several months because the consumer recovery likely will idle in the best-case scenario and could decline at worst. That's because the combined effect of political squabbling and tax hikes will erode buyers' confidence, NFIB concluded  …
  • State and local governments in the U.S. will have a buffer to withstand federal budget cuts. They will be able to hire and spend on their own because they are in their best financial condition since the recession ( Jan. 7). State and local authorities will add employees in 2013, after cutting their work forces by roughly 500,000 in the past five years, Mark Zandi, chief economist at Moody's Analytics Inc. in West Chester, Pa., told Bloomberg.  He forecasts that fourth-quarter payrolls will be 220,000 more than in the same period for 2012. Also, St. Louis-based Macroeconomic Advisers projects that state and local government expenditures and investments will rise 1.8%--triple the increase last year. That shift to regional spending will help the country withstand the jolt from federal spending cuts and tax increases--keeping the economic recovery on track, Zandi said …

News of the Competition (01/09/2013)

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MADISON, Wis. (1/9/13)

  • After receiving one of the largest government bailout packages during the financial crisis, the board of directors at American International Group Inc. (AIG) is contemplating whether to join a lawsuit accusing the U.S. government of implementing too-onerous terms in its bailout package of 2008-2009 (The Wall Street Journal Jan. 8 and The New York Times DealBook Jan. 7). AIG's board will meet today to listen to arguments for and against joining the $25 billion lawsuit, a source familiar with the matter told the Journal. In 2011, Maurice R. Greenberg, former CEO of AIG, who still is a major investor in the company, filed a lawsuit on behalf of fellow shareholders. Greenberg has urged AIG to join the suit--a move that could push the government to enter settlement talks, the Times said. Although the suit does not say that government help was unnecessary, it posits that the rescue was onerous because it took a 92% ownership stake in AIG, involved high interest rates and sent billions of dollars to AIG's Wall Street clients, the Times said. That rescue obviated tens of billions of dollars that shareholders would have received--and also was in violation of the Fifth Amendment, which forbids ceasing private property for "public use, without just compensation," the Times said. The case is pending in federal claims court in Washington, D.C., and the government will present the case against joining the lawsuit, the source told the Journal
  • Bank of America (BofA) Monday sold off roughly 20% of its mortgage loan-servicing business as a component of its agreement to pay Fannie Mae more than $11 billion to settle an ongoing dispute over bad mortgages (The New York Times DealBook Jan. 7). The move is a continuance of BofA's large-scale retreat from an expensive expansion into the home mortgage market, the Times said. That payment settles allegations that before the financial crisis BofA made bad mortgages that home buyers had a difficult time repaying, and then sold the problem mortgages to the U.S. government, the Times said. Taxpayer-supported Fannie Mae sustained huge losses when borrowers defaulted, the Times said …