WASHINGTON (MNI) – The following is the text of a press release
from the New York Federal Reserve, which released a third quarter report
that shows consumer debt is continuing its downward trend, November 8:

The Federal Reserve Bank of New York today released its Quarterly
Report on Household Debt and Credit for the third quarter of 2010, which
shows that consumer debt continues its downward trend of the previous
seven quarters, though the pace of decline has slowed recently. Since
its peak in the third quarter of 2008, nearly $1 trillion has been
shaved from outstanding consumer debts.

Additionally, this quarter’s supplemental report addresses for the
first time the question of how this decline has been achieved and notes
a sharp reversal in household cash flow from debt, indicating a decrease
in available funds for consumption. According to newly available data
through year end 2009, the payoff of debt by consumers reduced their
cash flow by about $150 billion, whereas between 2000 and 2007,
borrowing had contributed more than $300 billion annually to consumers’
cash flow.

Excluding the effects of defaults and charge-offs, available data
show that non-mortgage debt fell for the first time since at least 2000.
Also, net mortgage debt paydowns, which began in 2008, reached nearly
$140 billion by year end 2009. These unique findings suggest that
consumers have been actively reducing their debts, and not just by
defaulting.

“Consumer debt is declining but only part of the reduction is
attributable to defaults and charge-offs,” said Donghoon Lee, senior
economist in the Research and Statistics Group at the New York Fed.
“Americans are borrowing less and paying off more debt than in the
recent past. This change, which we continue to study carefully, can be a
result of both tightening credit standards and voluntary changes in
saving behavior.”

Also noteworthy in the third quarter:

– Household delinquent debt continues to decline and currently
account for about $1.3 trillion or 11 percent of consumer debt,
representing an 8.2 percent decline from a year earlier;

– The proportion of current mortgage balances that transitioned
into delinquency rose slightly from 2.6 percent to 2.7 percent, after
about a year of decline.

– Given the similar pattern observed in the third quarter of 2009,
one might suggest this is a seasonal effect, though the New York Fed
continues to closely monitor such developments.

– About 457,000 individuals received home foreclosure notices on
their credit reports between July 1 and September 30, 2010, a 5.5
percent decrease from the second quarter and a 6.4 percent drop from a
year earlier.

– The number of new bankruptcies noted on credit reports fell 16
percent from the previous quarter (from 621,000 to 522,000), but is 1
percent higher from a year earlier.

This information is aimed at helping community groups, small
businesses, state and local government agencies and the public to better
understand, monitor and respond to trends in borrowing and indebtedness
at the household level.

The household debt and credit data will be updated quarterly and
include such categories as the number of bankruptcies, per capita debt
levels, total debt levels and composition of debt, new originations of
installment loans, total balance by delinquency status, foreclosures and
new delinquencies by loan type for the United States and select states.

The report is based on a nationally representative random sample
drawn from data provided by the New York Fed’s Consumer Credit Panel.
Sections of the report are presented as interactive graphs on the New
York Fed’s Credit Conditions web page and the full report is available
for download.

The next quarterly reports are expected to be released on February
14, 2011; May 9, 2011; and August 8, 2011.

** Market News International Washington Bureau (202) 371-2121 **

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