Flow of Funds Review & Analysis

[Finmktctr@xxxxxxx]

New From the Financial Markets Center: Sept. 24, 2001
Flow of Funds Review & Analysis: Q2 2001
The Federal Reserve's Flow of Funds Accounts for April-June 2001 was released
last week and offered new evidence of pre-September 11 pressures on the U.S.
economy.  Among the highlights covered in Jane D'Arista's quarterly FFRA:

* In the face of nearly nonexistent GDP growth, borrowing by all nonfederal
sectors rose at an 8.3 percent annualized rate during the second quarter.
Even though the growth of consumer credit moderated and household net worth
increased, household debt expanded at nine times the pace of disposable
income growth.

* As corporations used a robust bond market (now a casualty of September 11)
to shift into longer-term debt, bank credit and total bank loans slowed
dramatically, diminishing at an even faster rate than they did during the
credit crunch and wave of bank failures in the early 1990s.

* U.S. credit markets remained highly dependent on capital inflows, which
accounted for one-fifth of total new lending and provided major impetus to
the corporate bond  and agency paper markets.  A slowdown in or withdrawal of
inflows could be especially problematic for Fannie Mae, Freddie Mac and other
GSEs that have aggressively intermediated funds between foreign investors and
domestic borrowers.

Additional details and commentary:
http://www.fmcenter.org/pdf/flow09-01nocov.pdf