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The GOP-led House Judiciary committee will issue subpoenas to former FBI Director James Comey and former Obama Attorney General Loretta Lynch, according to Bloomberg and CNN‘s Manu Raju. 

The subpoenas will reportedly be issued on November 29 and December 5, while the GOP says they would prefer them to meet in private but are open to public testimony. 

New: GOP-led House Judiciary, in its final days in power, is planning to issue subpoenas to former FBI Director James Comey and President Obama’s attorney general, Loretta Lynch – on Nov. 29 and Dec. 5. GOP wants them in private setting, though they’ve said they would publicly

— Manu Raju (@mkraju) November 16, 2018

Developing… 

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Authored by James Howard Kunstler via Kunstler.com,

I suspect there’s a hidden agenda behind the announcement in The Wall Street Journal op-ed by former Hillary Clinton aide Mark Penn that the Ole Gray Mare is actually eyeing another run for the White House in 2020. No, it’s not just that she would like to be president, as she averred on video last week in a weak moment, or that she has decided late in life to go full Bolshevik policy-wise. It is to establish her in the public mind as a serious candidate so that when she is indicted a hue-and-cry will arise that the move is a purely political act of revenge by the wicked Trump.

Of course, she’s not a serious candidate because too many people recognize her naked corruption, and she’s carrying so much noisome baggage that her entourage looks like one of those garbage truck convoys hauling New York’s trash to flyover country. Prosecutors don’t even have to search very hard for evidence of her misdeeds. It’s smeared all over the swamp-scape in the established facts about the Steele Dossier and its engineered journey through the highest levels of the FBI and Department of Justice, and the wild machinations that ensued when the cast of characters in those places scrambled to cover their asses following the debacle of Hillary’s election loss.

Little is known about what is going on inside the Mueller commission. But if, as it appears, the Special Counsel is still stalking Russian Facebook trolls and ignoring the slime-trail of  huggermugger left behind by Hillary & Company, then we are seeing one of the most fantastic failures of law enforcement in history. Still, there’s a possibility — low-percentage in my view — that Mr. Mueller might disclose a raft of charges against the Clinton gang and her errand boys.

The trouble is that such charges may lead to the some of the highest former officials in the land, including former CIA director John Brennan, former Director of National Intelligence James Clapper, former Attorney General Loretta Lynch, and perhaps even the sacred former President Obama. Even Mr. Mueller himself is suspect in the 2009 Uranium One deal that conveyed over $150-million dollars from Russian banks into the Clinton Foundation coffers.

If it turns out to be the case that Mr. Mueller’s report completely overlooks all that, then there is going to be a mighty collision between his office and the new management of the Justice Department, Mr. Whitaker, the Acting Attorney General, and whomever is finally confirmed as the new regular AG. Personally, I don’t see how Mr. Mueller can evade the questions over these matters. Too many wheels have been set in motion, and some of these wheels are coming loose — such as the mischief promulgated by the international man-of-mystery Joseph Misfud, who was likely working for US intel via the British MI6 to game George Papadopoulos into a Russian collusion set-up that he demurred from. The set-up failed spectacularly, and now that the facts are becoming known about it, Mr. Mifsud has come out of hiding, and his lawyers are preparing to serve him up to the Senate Judiciary Committee. Won’t that be fun?

Many of the other characters involved in these perfidious schemes — Comey, Strzok, Page, Ohr, McCabe, et al — have been keeping remarkably low profiles lately (except for the reckless and feckless John Brennan, who apparently can’t keep his pie-hole shut on MSNBC). Hillary has been making the rounds, too, on some kind of phony-baloney “listening” tour. But she looks sore-beset and worried on stage, slumped in her easy chair, and I’m persuaded she’s simply going through motions to pretend that she’s still a credible political figure so that when the hammer comes down on her she can issue the war whoops that will start Civil War 2 in earnest.

Meanwhile, a giant archive of documents in these matters is awaiting declassification.

The buzz is that Mr. Trump delayed this before the midterm elections due to threats from our “intel community” that the documents would compromise our relations with foreign intel outfits in friendly lands – namely the aforementioned MI6 of the UK.  The collusion was apparently done to avoid legal questions about using US intel to spy on members of the Trump election campaign.

But Theresa May’s government is imploding now, and that nation will be preoccupied with other problems going forward, so it is more likely that the garbage barge of unredacted emails, texts, and agency transcripts will sail right into public domain in the days ahead, whether Mr. Mueller likes it or not.

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For much of 2018, the prevailing market theme was the one Morgan Stanley dubbed “rolling bear markets” when any time a given asset was hit, whether emerging markets, Italian bonds, or tech stocks, money would simply rotate from one place to another. However, at the end of September, when rates spiked amid concerns the Fed was prepared to push rates beyond neutral, things changed overnight.

Fast forward to now when what appeared to be somewhat orderly sequential blow ups have mutated into wholesale market panics in which everything starts to go wrong at once, or as Bloomberg describes it “everywhere you look, something’s blowing up.”

In commodities, it’s the record plunge in oil. In equities, it’s six weeks of turbulence in the S&P 500. Debt markets have been rattled by the turmoil engulfing General Electric and PG&E. Bitcoin just plunged 13 percent. And Goldman Sachs, the storied investment bank, is having the worst week since 2016.

As Bloomberg correctly notes, by themselves these sudden asset air pockets would be enough to incite panic, “but have them erupt all around and even the most grizzled Wall Street types can start to sound paranoid. Does GE have something to do with Goldman? How does Bitcoin sway the stock market? Wildfires have nothing to do with crude’s convulsions, but both are bad news for banks.”

“The risk of contagion is understood. What’s not understood is where and how connected things are,” Stewart Capital Advisors’ Malcolm Polley said by phone. “Just about anything can create panic, create contagion, and it doesn’t have to be something that makes sense.”

That bad things should congregate isn’t surprising to Donald Selkin, chief market strategist at Newbridge Securities, who sees it as a consequence of having it so good for so long. He’s waking up every night to check the futures.

“People are saying, ‘Get me out across the board,”’ Selkin said. “Everyone is anxious. I am anxious. You buy a good company and hope for the best and pray it doesn’t get destroyed. Look at Apple down $40. Look at some of the most well-known companies being decimated. I own Apple. I own Exxon. Of course I feel a lot of pressure.”

The biggest headache is plaguing investors is identifying the channels of contagion that are dragging seemingly disparate assets lower, and which for years remained dormant in the face of adverse stimuli. Some examples:

Bitcoin is viewed as an isolated ecosystem but it does have a bearing on chipmakers, a particularly speculative corner of the market that is watched to gauge investors’ risk appetite. The digital currency’s peak in December came two months before the S&P 500’s worst rout in two years.

The connection between GE and banks? After the debt downgrade made it harder for the manufacturer to borrow through commercial paper, it has turned to credit lines provided by banks to fund businesses. According to its quarterly filings, the industrial conglomerate has drawn on $41 billion in credit lines from more than 30 lenders.

Not everyone agrees, and the die-hard bulls are still hoping that there is no correlation between the now shrinking consolidated global central bank balance sheet, and these increasingly more frequent events. “We have seen a number of idiosyncratic stories going on such as GE, GS, PG&E which are not necessarily a signal of a market correction,” said NN Investment Partners money manager Dorian Garay. “U.S. credit and macro fundamentals are solid as reiterated by recent macro indicators and earnings.”

Perhaps Garay, like all the other millennials in the market who have never lived through a real bear, forgot that the market – when stripped of its central bank training wheels – is a discounting mechanism, and it’s not about current earnings but the future cash flow streams. Although in a world dominated by central banks, one can see why people would forget this modest distinction.

Some have had no choice but to remember, however.

“We’re still focused not only on valuations but on the quality of balance sheets going forward,” said Joe Smith, deputy CIO at Omaha, Nebraska-based CLS Investments. Low rates have enabled borrowing to fund share repurchases and higher dividends, he added. “Some of those factors could likely translate as things that create more angst or anxiety for investors going forward as people start to think about whether those companies in effect overspent too much with their credit cards.”

He has a point: in fact, despite spending a record $800 billion on buybacks in 2018, US corporations have nothing to show for it. Take the US buyback index, SPBUYUP, which is down YTD.

Worse, the “king of buybacks”, Apple, has spent $100BN on stock repurchases in 2018, and yet recently entered a bear market, down 20% from its highs, and also below its 200D Moving average.

It’s no wonder that in this environment – where seemingly uncorrelated assets can suddenly collapse together for unknown reasons – traders are extremely nervous.

They will be even more nervous when they learn that according to Bank of America, even as the S&P is fading, the ingredients of a flash crash are rising as bond / FX / equity volatility is all trending up amid vicios deleveraging events – such as the recent plunge in oil offset by a record surge in nat gas. This is largely the result of divergent central bank policies and yield differentials, which manifest themselves via abnormal spreads.

To justify the controversial claim that a crash is coming – an prediction which will only assure guarantee even more sleepless nights for already worn out millennial “traders” who are still learning how to spell “sell” – BofA CIO Michael Hartnett shows the near record 295bps spread between Libor-Euribor which was last seen on two occasions: the first time in October 99, just before the bursting of the dot com bubble, and the second time in 2006 – just before the US housing bubble burst and ushered in the global financial crisis. It is this spread that is the “tell” that a flash crash is imminent.

So what will catalyze said flash crash? To BofA, triggers could be “violent US dollar move and/or shock macro data forcing abrupt GDP & EPS downgrades.” Or, to quote Leuthold Weeden’s CIO, Jim Paulsen, “When this thing finally finds a bottom, panic will be everywhere.”

We agree.

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Authored by Wolf Richter via WolfStreet.com,

Mortgage rates are climbing faster than the 10-year Treasury yield.

The average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment rose to 5.17% for the latest reporting week, according to the Mortgage Bankers Association(MBA) today. This is the highest average rate since September 2009 (chart via Investing.com):

Many people with smaller down payments and/or lower credit ratings are already paying quite a bit more. Top-tier borrowers pay less.

Thus, mortgage rates have moved a little closer to the next line in the sand, 6%, which is still historically low. At that point, the interest rate would be back where it had been in December 2008, when the Fed was unleashing its program of interest rate repression even for long-dated maturities via QE that later included the purchase of mortgaged-backed securities (MBS), which helped push down mortgage rates further.

Now the Fed is shedding Treasury securities and mortgage-backed securities, and we’re starting to see the impact on mortgage rates: The difference (spread) between the 10-year yield and the interest rate of the average 30-year fixed-rate mortgage has widened sharply.

Since the beginning of the year:

• The 30-year mortgage interest rate has risen 95 basis points, or nearly 1 percentage point (from 4.22% to 5.17%).

• The 10-year Treasury yield has risen 71 basis points (from 2.46% to 3.17%)

• The spread between the two has widened from 176 basis points on at the beginning of January to 200 basis points now.

In other words, mortgage rates are climbing faster than the 10-year Treasury yield, now that the Fed has begun the shed mortgage-backed securities. This is expected. It’s part of the QE unwind – it’s part of the Fed exiting the mortgage market and pulling its support out from under it.

But 6% is still low:

Home prices in many markets have risen far above the home prices back in 2008 and 2009, and far above even the local peaks during Housing Bubble 1 in those markets now that they have developed into a fully blooming Housing Bubble 2.

Home prices as a whole averaged out across the US have surged 11.5% above the crazy peak of Housing Bubble 1:

Even current mortgage rates – as low as they still are, historically speaking – are having an impact on the housing market and are putting pressure on it at the margin, with some potential buyers being locked out and others scared off as they’re finding today’s inflated home prices don’t mix well with even slighter higher mortgage rates: What was barely affordable for them, with a good amount of stretching, has become unaffordable.

And the cooling effect is already becoming visible in the first data sets for some of the previously hottest markets [Declines Hit the Most Splendid Housing Bubbles in America].

But for real pain to set in, the average 30-year fixed rate mortgage would need to get closer to 6%. This is likely the pain-threshold for the housing market. 6% will block enough potential buyers from buying at current prices to where sellers will have serious trouble selling their homes unless prices drop enough.

The cure for this market will be lower prices – even if it means rising defaults and considerable problems among mortgage lenders, particularly the non-bank lenders (the “shadow banks”) that have very aggressively moved into the mortgage market over the last few years. Quicken Loans has now become the largest mortgage lender in the US, ahead of Wells Fargo. These shadow banks are less regulated and have taken more risks than the banks. The Fed is already worried about them but worrying is all it can do since it doesn’t regulate them.

So when will the mortgage market get to the pain threshold of 6%? Given that the spread between the 10-year Treasury yield is widening, and that therefore mortgage rates will rise faster than the 10-year yield, and that the yield curve will remain relatively flat but won’t invert, there is a strong likelihood that 6% is only about three rate hikes away – and that will likely be accomplished by mid-2019.

Seattle home prices fall sharply. New York condo prices are nearly flat for the year. First feeble declines in San Francisco, Dallas, Denver, etc. Something is afoot. Read…  Declines Hit the Most Splendid Housing Bubbles in America  

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Facebook executives Mark Zuckerberg and Sheryl Sandberg are battling backlash over an explosive investigation by the New York Times into Facebook’s mercenary damage control tactics in the wake of several major scandals. 

Despite fresh calls from investors for Zuckerberg to step down in his dual role as CEO and chairman and appoint an independent director to oversee the board, the 34-year-old tech titan brushed off the suggestion during a Thursday call with journalists. 

“A company with Facebook’s massive reach and influence requires robust oversight and that can only be achieved through an independent chair who is empowered to provide critical checks on company leadership,” said New York City comptroller, Scott Stringer. 

Zuckerberg disagrees. “I don’t think that that specific proposal is the right way to go,” said the Facebook CEO when asked if he would consider stepping down, adding that other initiatives had been launched to “get more independence into our systems.” 

The measures include creating an independent body to advise the company on decisions over whether controversial content should remain on the site. 

Ultimately, he said Facebook is never going to eradicate mistakes. “We’re never going to get to the point where there are no errors,” he told reporters. “I’m trying to set up the company so that way we have our board, and we report on our financial results and do a call every quarter, but that also we have this independent oversight that is just focused on the community.” –Business Insider

Facebook COO Sheryl Sandberg, meanwhile, is claiming ignorance – telling CBS This Morning co-host Norah O’Donnell “we absolutely did not pay anyone to create fake news – that they have assured me was not happening.” 

Wow…Sheryl Sandberg is quick to throw the Facebook communications team under the bus here https://t.co/L6x3ufLHvo pic.twitter.com/X7cHa83Yiq

— Tim Stenovec (@timsteno) November 16, 2018

In their Wednesday exposé – the culmination of interviews with over 50 current and former company executives, lawmakers, government officials, lobbyists and congressional staff members, the New York Times reported that Facebook had hired GOP PR firm, Defenders, which smeared liberal detractors as Soros operatives – and worked with a sister company to create negative propaganda about competitors Google and Apple. 

Mr. Kaplan prevailed on Ms. Sandberg to promote Kevin Martin, a former Federal Communications Commission chairman and fellow Bush administration veteran, to lead the company’s American lobbying efforts. Facebook also expanded its work with Definers.

On a conservative news site called the NTK Network, dozens of articles blasted Google and Apple for unsavory business practices. One story called Mr. Cook hypocritical for chiding Facebook over privacy, noting that Apple also collects reams of data from users. Another played down the impact of the Russians’ use of Facebook.

The rash of news coverage was no accident: NTK is an affiliate of Definers, sharing offices and staff with the public relations firm in Arlington, Va. Many NTK Network stories are written by staff members at Definers or America Rising, the company’s political opposition-research arm, to attack their clients’ enemies. –NYT

 Meanwhile, Sandberg stressed that Facebook was undertaking new security measures, telling O’Donnell: “Our strategy was to shore up the security on Facebook and make major investments there,” and that the company had made significant investments in combatting fake news and foreign influence.

“It was not what I was doing nor was it the company’s strategy to deflect, to deny or to hire PR firms to do things. That’s not the strategy. And I was part of none of that. We’ve taken great steps, we’ve made huge investments. We’ve invested a ton in AI and technology and if you were following us before the election you saw those efforts pay off. We were able to take down lots of stuff over and over, over and over because we were now focused on this,” said Sandberg. 

When asked if rank-and-file employees are confident in her, Sandberg replied: “Yes, I believe so.” 

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Authored by Haley Zaremba via Oilprice.com,

Canadian oil producers are in an increasingly tough predicament. With high and increasing oil demand around the globe over the last year, Canadian oil production has increased accordingly. All of this is simple and predictable economics, but now Canadian oil has hit a massive roadblock. Producers have the supply, and they have more than enough demand, but they don’t have the means to make the connection. Canadian export pipelines simply don’t have the capacity to keep up with either the supply or the demand.

Canadian oil producers have now maxed out their storage capacity, and the Canadian glut continues to grow while they wait for a solution to the pipeline problem to materialize. As pipeline space is at a premium and storage has hit maximum capacity, oil prices have fallen dramatically, and the differentials that had previously been hitting heavy oil hard in Canada (now at below $18 a barrel for the first time since 2016) have now spread to light oil and upgraded synthetic oil sands crude as well, leaving overall Canadian oil prices at record lows.

(Click to enlarge)

Now, adding to the problem, growth in oil demand has begun to slow in the wake of skyrocketing United States production and the weakening of U.S.-imposed sanctions on Iranian oil. First, the U.S. granted waivers to eight nations to continue buying Iranian oil despite strong rhetoric, and now the European Union has undermined the sanctions even further.

In an effort to correct the pricing drop, some Canadian drillers have been cutting production levels, turning to more expensive forms of transportation like railways to ship their oil, and in some cases even using trucks to move their product. One of Canada’s major producers, Cenovus Energy, has gone so far as to implore the government to impose production caps until the oil glut and inversely corresponding, free falling prices are under control. Some oil sands producers, including Canadian Natural Resource, Devon Energy, Athabasca Oil, and the aforementioned Cenovus Energy, have taken the issue of over-production into their own hands by announcing curtailments that could total 140,000 barrels a day or more.

The massive Keystone XL pipeline project from TransCanada Corp. was going to be a major move in the right direction for the Canadian oil industry, adding much-needed capacity to the network. Keystone XL would add 830,000 barrels of daily shipping capacity — approximately 4.2 percent of total U.S. oil demand — by 2021. Now, in yet another bit of bad news, it looks like Canada won’t be able to count on Keystone XL as a saving grace after all, as a Montana federal judge recently ruled to further delay the pipeline at what is easily the worst possible time for the industry.

Last Thursday’s ruling for an additional environmental review is just the latest setback in a decade-long legacy full of roadblocks for the controversial Keystone XL pipeline. The huge project would construct a 1,179-mile long pipeline for the purpose of delivering Canadian crude from Alberta’s oil sands to a Nebraska junction, from where it would continue its transnational journey all the way to refineries near the Gulf of Mexico. The pipeline was plagued with lawsuits since its inception and has recently seen new waves of litigation since President Donald Trump announced his approval for Keystone XL to cross the U.S.-Canada border in early 2017. At that time, two separate lawsuits challenging the project were filed by the Indigenous Environmental Network, River Alliance and Northern Plains Resource Council, which resulted in last week’s ruling that prohibits both TransCanada and the U.S. government from “from engaging in any activity in furtherance of the construction or operation of Keystone and associated facilities” until the U.S. State Department carries out a supplemental review.

As the options for Canadian oil become more limited, the industry is growing more and more dependent on even fewer projects, including Enbridge Inc.’s Line 3 expansion and the federal government’s Trans Mountain expansion project, leaving dangerously little margin for error.Could Brazil’s Oil Sector Trigger An Economic Miracle

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The algos have their sensitivity cranked up to ’11’ today…

President Trump said the following…

• *TRUMP: CHINA WOULD LIKE TO MAKE A DEAL

• *TRUMP: CHINA SENT LIST OF THINGS WILLING TO DO ON TRADE

• *TRUMP: THINK WE WILL HAVE GREAT RELATIONSHIP WITH CHINA

• *TRUMP: DON’T WANT TO PUT CHINA IN BAD POSITION

• *TRUMP: CHINA LIST PRETTY COMPLETE, FOUR OR FIVE THINGS LEFT OFF

And the machines panic bid stocks…

It appears Trump has discovered the OPEC jawbone strategy: repeat the exact same thing every day, betting idiot algos will buy.

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Total household debt hit a new record high, rising by $219 billion (1.6%) to $13.512 trillion in Q3 of 2018, according to the NY Fed’s latest household debt report, the biggest jump since 2016. It was also the 17th consecutive quarter with an increase in household debt, and the total is now $837 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008. Overall household debt is now 21.2% above the post-financial-crisis trough reached during the second quarter of 2013.

Mortgage balances—the largest component of household debt—rose by $141 billion during the third quarter, to $9.14 trillion. Credit card debt rose by $15 billion to $844 billion; auto loan debt increased by $27 billion in the quarter to $1.265 trillion and student loan debt hit a record high of $1.442 trillion, an increase of $37 billion in Q3.

Balances on home equity lines of credit (HELOC) continued their downward trend, declining by $4 billion, to $432 billion. The median credit score of newly originating mortgage borrowers was roughly unchanged, at 760.

Mortgage originations edged up to $445 billion in the second quarter, from $437 billion in the second quarter. Meanwhile, mortgage delinquencies were unchanged improve, with 1.1% of mortgage balances 90 or more days delinquent in the third quarter, same as the second quarter.

Most newly originated mortgages continued went to borrowers with the highest credit scores, with 58% of new mortgages borrowed by consumers with a 760 credit score or higher.

The median credit score of newly originating borrowers was mostly unchanged; the median credit score among newly originating mortgage borrowers was 758, suggesting that with half of all mortgages going to individuals with high credit scores, mortgages remain tight by historical standards. For auto loan originators, the distribution was flat, and individuals with subprime scores received a substantial share of newly originated auto loans.

In what will come as a surprise to nobody, outstanding student loans rose $37BN to a new all time high of $1.44 trillion as of Sept 30. It should also come as no surprise – or maybe it will to the Fed – that student loan delinquencies remain stubbornly above 10%, a level they hit 6 years ago and have failed to move in either direction since…

… while flows of student debt into serious delinquency – of 90 or more days – spiked in Q3, rising to 9.1% in the third quarter from 8.6% in the previous quarter, according to data from the Federal Reserve Bank of New York.

The third quarter marked an unexpected reversal after a period of improvement for student debt, which totaled $1.4 trillion. Such delinquency flows have been rising on auto debt since 2012 and on credit card debt since last year, which has raised a red flag for economists.

Auto loan balances also hit an all time high, as they continued their six-year upward trend, increasing by $9 billion in the quarter, to $1.24 trillion. Meanwhile, credit card balances rose by $14 billion, or 1.7%, after a seasonal decline in the first quarter, to $829 billion.

Despite rising interest rates, credit card delinquency rates eased slightly, with 7.9% of balances 90 or more days delinquent as of June 30, versus 8.0% at March 31. The share of consumers with an account in collections fell 23.4% between the third quarter of 2017 and the second quarter of 2018, from 12.3% to 9.4%, due to changes in reporting requirements of collections agencies.

Auto loan balances also hit an all time high, as they continued their six-year upward trend, increasing by $27 billion in the quarter, to $1.265 trillion. Meanwhile, credit card balances rose by $15 billion to $844 billion. In line with rising interest rates, credit card delinquency rates rose modestly, with 4.9% of balances 90 or more days delinquent as of Sept 30, versus 4.8% in Q2.

Overall, as of September 30, 4.7% of outstanding debt was in some stage of delinquency, an uptick from 4.5% in the second quarter and the largest in 7 years. Of the $638 billion of debt that is delinquent, $415 billion is seriously delinquent (at least 90 days late or “severely derogatory”). This increase was primarily due to the abovementioned increase in the flow into delinquency for student loan balances during the third quarter of 2018. The flow into 90+ day delinquency for credit card balances has been rising for the last year and remained elevated since then compared to its recent history, while the flow into 90+ day delinquency for auto loan balances has been slowly trending upward since 2012. About 215,000 consumers had a bankruptcy notation added to their credit reports in 2018Q3, slightly higher than in the same quarter of last year. New bankruptcy notations have been at historically low levels since 2016.

This quarter, for the first time, the Fed also broke down consumer debt by age group, and found that debt balances remain more concentrated among older borrowers. The shift over the past decade is due to at least three major forces. First, demographics have changed with large cohorts of baby boomers entering into retirement. Second, demand for credit has shifted, along with changing preferences and borrowing needs following the Great Recession. Finally, the supply of credit has changed: mortgage lending has been tight, while auto loans and credit cards have been more widely available.

In addition to an overall increase in the share of debt held by older borrowers, there has been a noticeable shift in the composition of debt held by different age groups. Student and auto loan debt represent the majority of debt for borrowers under thirty, while housing-related debt makes up the vast majority of debt owned by borrowers over sixty.

Confirming what many know, namely that Millennial borrowers are screwed, the Ny Fed writes that older borrowers have longer credit histories with more borrowing experience, as well as higher and typically steadier incomes; “thus, they often have higher credit scores and are safer bets for lenders.” Tighter mortgage underwriting during the years following the Great Recession has limited mortgage borrowing by younger and less creditworthy borrowers; meanwhile, student loan balances – and as most know “student” loans are usually used for anything but tuition – and participation rose dramatically and credit standards loosened for auto loans and credit cards. Consequently, there has been a relative shift toward non-housing balances among younger borrowers, while housing balances moved to the older and more creditworthy borrowers with lower delinquency rates and better performance overall.

And since this is a circular Catch 22, absent an overhaul of how credit is apportioned by age group, Millennials and other young borrowers will keep getting squeezed out of the credit market resulting in a decline in loan demand – and supply – which is slow at first and then very fast.

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