"Rich Americans Increased Borrowing Despite Recession Fears During 'When the Wealthy Make Money'"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] As the United States experiences its worst inflation in over 40 years and concerns about an economic recession continue to grow, wealthy Americans have been steadily increasing their bank loans in the first half of this year. This is interpreted as an indication that, despite the Federal Reserve's (Fed) interest rate hikes, borrowing costs are still considered low.

According to the Wall Street Journal (WSJ) on the 24th (local time), the loan growth rates in the asset management divisions of Morgan Stanley and Bank of America (BoA) recorded double digits in the second quarter of this year. Morgan Stanley's loan growth rate in Q2 was 30% year-over-year, amounting to approximately $50 billion (about 65.5 trillion KRW). BoA's loans increased by 12% in Q2 to $222 billion. The increase significantly exceeded that of the consumer sector (4%).

WSJ stated, "This increase is another sign that American consumers are not showing caution in preparing for a recession," adding, "During earnings announcements earlier this month, leaders of major U.S. banks said that customers are maintaining loans without reducing bank deposits at all."

Mike Kosnitsky, head of asset management at the major law firm Pillsbury Winthrop Shaw Pittman LLP, analyzed, "Volatility and market downturns are times when the wealthy can make money," adding, "Now is the time to buy." Consultant Tom Anderson also noted that despite interest rate hikes, bank loans still cost less compared to credit card or asset-backed securities loans, calling it "the cheapest method."

In fact, during the COVID-19 pandemic, wealthy individuals in the U.S. grew their assets further. According to Moody's Analytics, Americans saved $2.7 trillion between January 2020 and December last year, with more than half of that coming from the top 10% income earners. WSJ reported, "Wealthier Americans gained more wealth during the pandemic due to the stock market and real estate market booms."

Andy Seitz, head of asset management at BoA, also mentioned tax payments as another reason for the increase in loans among the wealthy. Personal income taxes must be paid by September 30, the end of the fiscal year, and U.S. personal income tax this year is expected to reach an all-time high.

This content was produced with the assistance of AI translation services.