When the article says, “Commercial bank lending dropped nearly $105 billion in the two weeks ended March 29, the most in Federal Reserve data back to 1973,” and later also notes that banks “divested” themselves of billions of dollars in loans, where is the money going?
Are they selling the loans off their books to third parties? Or are they just refusing to make new loans that they would have otherwise consistently made?
I was listening to Jim Cramer discuss it this morning, and he said the banks are nervous about lending out money/investing, in what is usually considered safe. Things like US treasuries or real estate. They are fearing a liquidity crunch.
I can't answer that concretely, but there is an active secondary market for corporate loans, so I have always understood divestment to mean selling the loans to third parties (eg, credit funds and CLOs), as you mention.
Are they selling the loans off their books to third parties? Or are they just refusing to make new loans that they would have otherwise consistently made?