Guy LeBas

tracks what banks do, and what borrowers do.

And what they're both doing right now is acting a little scared.

After two years of recession, lenders started easing up last year, making more money available, and cheaply. But since May 1, lenders have gone conservative, matching the careful mood of consumers.

"If this persists, we're going to have greater risk for another round of economic problems," LeBas, baby-faced chief bond strategist for Janney Capital Markets in Philadelphia, told me Friday.

In the consumer-dependent U.S. economy, LeBas reminded, "the lack of borrowing has major implications for slower economic growth" and weak investment returns "for years or even decades to come."

Every working day, LeBas calculates what he calls the Credit Availability Oscillator, an index that measures how easy (or tough) it is to borrow money.

He compares the spreads between what banks pay for money and what they charge car buyers and home buyers, credit card shoppers, businesses, and real estate owners.

Credit markets, he says he believes, provide "a lot of information about economic conditions, especially when we're talking about lending."

The index also works in data from the latest Federal Reserve reports, which indicate the lenders that banks are targeting.

The index is called CAO for short, pronounced "Cow," and dubbed "Bessie" (a famous cow name, for you city kids) by LeBas' colleagues and clients.

LeBas, a Swarthmore graduate, set up Bessie in 2007 after moving to Janney from Wall Street, just as the financial system was starting to fray.

Plugging in data from past years, he saw how the gap between what banks charge and what they pay had widened in 2000-02, after the dot.com stock market collapse and the World Trade Center attacks.

Loan spreads tightened considerably in the inflated real estate markets of the mid-2000s, when banks competed for business and shaved rates lower. That signaled easy money, and high Bessie scores.

Spreads widened again in 2008 as the credit markets failed and lenders became reluctant to put out money they worried wouldn't be paid back. Bessie scores went deeply negative.

And then, late last year, credit markets recovered. Loan spreads tightened; rates fell. Lenders told the Federal Reserve they were more willing to lend money to quality borrowers. Bessie turned up.

"We saw a significant economic turnaround," LeBas told me. "Banks had gotten the majority of their losses behind them and were finally looking to lend."

And yet, borrowers stayed away. Federal Reserve data show total bank loans fell 5 percent in March and again in April, compared with a year earlier.

What's going on? LeBas says it is consumers' saying "no more." Unemployed baby boomers are living on their savings and cutting back on eating out or expanding their homes. This started in 2007, when credit was tight; but since it lasted through the mini-recovery of 2009, LeBas now thinks it's going to "persist for some years, as an aging population looks increasingly toward retirement."

That's a reversal from the previous generation, the Reagan-Bush I-Clinton-Bush II years, when Fannie Mae, as LeBas describes it, "began providing massive liquidity for the mortgage markets," and lenders encouraged consumers "to borrow against their houses, against their cars, and against their word." Per-capita borrowing rose nearly twice as fast as per-capita income. "A culture of loans" propped up the economy, LeBas said.

LeBas has come to believe, as Pacific Investment Management Co. boss Mohamed El-Erian has been preaching, that the "new normal" for Americans is slow growth.

In fact, Fed data show consumer lending began to turn up in April, confounding the slow-growers.

But now bankers are closing the window again. Since May 1, LeBas' index has been falling again, as loan spreads widen.

LeBas blames, in part, the end of last year's easy-money car-loan programs. But mostly, he blames "worries about Europe" for banks' renewed conservatism.

Not all analysts agree about why borrowing has been weak.

Veteran bank analyst Richard X. Bove of Rochdale Research is blaming the Federal Reserve. In his view, the Fed did a great job keeping the banks afloat without inflating prices, but a poor job getting them to pump the economy back up. Why? Because they're afraid the government will shut them down if they lend too much.

With consumers being careful, Bove thinks banks will try to lend more to business, like in the old days. But LeBas points out that today's service industries don't need as much borrowed cash as yesterday's factories.

Instead, LeBas sees signs banks are ready to lend more to the battered commercial real-estate business, where some ambitious investors see bargains galore.

Contact Joseph N. DiStefano at 215-854-5194 or JoeD@phillynews.com.