Magazine article EconSouth

Taking the Pulse

Magazine article EconSouth

Taking the Pulse

Article excerpt

A year and a half into the recession, the U.S. and Southeastern economies are still working through a variety of serious economic hurdles, made stubbornly persistent by strains in the financial system.

One of the challenges we tackle in this issue of EconSouth is reporting about the stress on the banking system in general and the fallout from the housing market on Southeast banks specifically. An article written by Scott Hughes, a senior financial analyst in the Atlanta Fed's supervision and regulation division, contrasts the banking environment from the upbeat, high-growth period before 2007 with the more challenging operating environment banks face today.

Sifting through data for his story, Hughes said he was taken aback by how rapidly consumers snapped their wallets shut. "I remember an economist a few years ago telling the audience that they should never underestimate the 'hedonism' of the U.S. consumer and the capacity and willingness of lenders to enable this tendency," he said.

Since Hughes wrote his article, consumer credit fell by $15.7 billion in April from March, reflecting tightened underwriting and weak demand. "It will be interesting to see whether or not this trend proves to be a near- or long-term phenomenon," he said. "If long term, it will have substantial implications for the economy and banking."

The economic crisis has filtered into the operations of state and local governments as well. Government coffers in the Southeast have taken a hit as falling home prices and sales, reduced consumer spending, and rising unemployment translate into lower tax collections. …

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