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Majority of Non-Revolving Credit Held By Federal Government

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credit_card_swipeRecently released data from the Federal Reserve Board indicates that consumer credit outstanding is continuing to expand. According to the release, total consumer credit outstanding increased at a seasonally adjusted rate of 5.4 percent in September. For the quarter overall, consumer credit rose by 5.2 percent. The September increase in consumer credit reflected an 8.7 percent increase in non-revolving credit, which encompasses student loans and auto loans. However, the growth in non-revolving credit was partially offset by a 2.9 percent decline in revolving credit, which is largely composed of credit card debt. Total outstanding consumer credit totaled $3.1 trillion at the end of September; 72.2 percent, $2.2 trillion, of this total represents non-revolving credit, while revolving credit accounts for the remaining 27.8 percent, $0.8 billion.

An earlier post demonstrated that student loans are major source of the growth in consumer credit. However, the underlying data also indicate that the federal government is becoming a large holder of consumer credit outstanding. The federal government was the smallest source of consumer credit in 1990. At the beginning of that year, the federal government accounted for 2.0 percent of consumer credit outstanding. By September 2013, the federal government accounted for 23.6 percent of consumer credit outstanding.

Most of the rise in consumer credit outstanding held by the federal government has occurred only recently. Since March 2010, following the shift of consumer credit from pools of securitized assets to other categories largely due to financial institutions’ implementation of the FAS 166/167 accounting rules, the share of consumer credit held by depository institutions and finance companies has declined while the share of consumer credit held by the federal government has risen. In March 2010, the share of consumer credit held by depository institutions was nearly half, 49.2 percent, of all consumer credit outstanding and the share held by finance companies was nearly a quarter, 23.7 percent, of consumer credit outstanding. Meanwhile the federal government held 9.6 percent of consumer credit outstanding. By September 2013, the share held by depository institutions fell to 40.3 percent and the proportion held by finance companies declined to 22.4 percent, but the percentage of consumer credit held by the federal government rose to 23.6 percent.

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