Sober Look | Apr 29, 2013 02:21AM ET
We've received a number of emails pointing to what looks like a slowdown in lending by U.S. chartered banks. The amount of loans and leases on balance sheets has stopped growing.
The real answer however has to do with the wonderful world of "shadow banking". Why would banks want to keep all these mortgages on their books when they can blow them out to Freddie and Fannie, who in turn sell them to the market in the form of agency MBS (mortgage backed securities). And who are the buyers? The usual suspects of course - insurance firms, mutual funds, etc., as well as the biggest buyer of them all - the Fed. In fact the holdings of MBS on Fed's balance sheet just hit a record. Mortgages are simply making their way from bank balance sheets onto the Fed's balance sheet in the form of MBS.
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