Credit Cards - Are they being paid down?

There has been some media interest in this question over the past couple weeks. The New York Times had a story about this a few days ago. In it they say that "analysts say that a significant portion of the decline is actually the result of financial institutions writing off billions of dollars in credit card debt as losses."

In fact, based on my crunching of the figures, it seems very clear that all of the decline is due to charge offs.

The first thing you need to know about credit card lending is that it's incredibly seasonal. As a group, credit card users run their balances up for Christmas and then pay most of those balances back during the next quarter. Behind this seasonality, there is a slow steady growth in balances. That growth slowed significantly in 2009, but never reversed.

So if your question is "Are people paying down their credit cards?" The answer appears to be that some people are, but not people in general.

Figures for this graph were generated from the FDIC's Quarterly Banking Profile, and the Fed's quarterly charge off figures. The impact of SFAS 167 (which brought credit card securitization trusts back onto bank balance sheets on January 1, 2010) was calculated by going through the top 20 banks' quarterly 10-Q's and generating the figures. I can't recommend that as a way to spend your time.

Adjustments to Bank Balance Sheet Items

Here's a list of the categories I have backed out of the FDIC's Quarterly Banking Profile, along with a justification.

Loans to Depositories - These are loans to other banks. If that money then gets on-lent out into the real economy, it should be covered in another category (Credit Cards, C&I, Mortgages, etc.).

Loans to Foreign Govts. - I assume that, like Elvis, this money has left the U.S. real economy building. Negligible in any case.

Treasurys - If purchased from private holders, I assume the money is recycled into some other investment. If purchased directly from the government, it makes more sense to not count it here and to track change in total government expenditures.

Equities - If purchased from private holders, I assume the money is recycled into some other investment.

Cash and due from Depositories - Cash, and loans to other banks

Fed funds sold and reverse repos - Loans to other banks

Bank premises & fixed assets - I suppose this one is arguable, since it could indicate purchases of commercial property and capital equipment that sends funds back into the real economy

Other REO - These are typically actual assets recovered from foreclosures, an intermediate stage prior to a writeoff

Trading account assets - Financial instruments assumed to be purchased from other intermediaries, or from individuals who will not spend the proceeds into the real economy

Intangibles - Balance sheet entries that result from acquisitions, again purchased from other intermediaries, or from individuals who will not spend the proceeds into the real economy

Other - This is a fairly big category, and it's impossible to tell what's in it. If I was more energetic I'd probably try to figure out whether changes here could be getting out into the real economy. However, other than an increase in Q1 2010 that I assume was caused by FAS 166 and 167, it hasn't moved much over the past couple years.

Charting the Suck - Updated

The latest Quarterly Banking Profile is out. Here's the previous graph with Q2's information added:

I'm still pondering whether my adjustments are reasonable.  I'll probably post some kind of justification for each category.  In any case,  I think it's fair to say that the trend isn't looking great.