How much was credit being funneled away from all other sectors in the economy?
The answer: Very little if any. Neither the general consumer lending:
nor the specific Real Estate lending:
appears to run in a different direction that Business Loans, except possibly, in the latter case, in late 2003 and early 2004.
Looking at the absolute numbers, while there is a significant negative correlation with consumer lending for the period, that is more than offset by the significant positive correlation with Real Estate lending over the period.*
So the statement probably made a good soundbite, but the reality is that all lending generally increased during the peak of the bubble. There does not appear to be evidence of “crowding out” of Business Loans.
*Real Estate lending for the period averages more than four times greater than consumer lending (2.73 trillion v. 680 billion), so the net result over the period is positive to business lending.
By contrast, a regression of the changes over the same period and there is virtually no support for the idea; Adjusted R^2 was slightly negative, and the coefficients both include 0 in a 95% confidence interval.