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Nickelless
Administrator
USA
5580 Posts |
 Posted - 12/01/2008 : 12:30:16
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(Reuters) – The U.S. credit card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.
The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.
"In other words, we expect available consumer liquidity in the form or credit-card lines to decline by 45 percent."
Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co represent over half of the estimated U.S. card outstandings as of September 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.
A consolidated U.S. lending market that is pulling back on credit is also posing a risk to the overall consumer liquidity, Whitney said.
Mortgages and credit cards are now dominated by five players who are all pulling back liquidity, making reductions in consumer liquidity seem unavoidable, she said.
"...We are now beginning to see evidence of broad-based declines in overall consumer liquidity."
"In a country that offers hundreds of cereal and soda pop choices, the banking industry has become one that offers very few choices," Whitney wrote in a note dated November 30.
She also said credit lines to consumers through home equity and credit cards had been cut back from the second-quarter levels.
"Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view," the analyst said.
(Reporting by Neha Singh in Bangalore; Editing by Vinu Pilakkott)
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redneck
1000+ Penny Miser Member
1273 Posts |
Posted - 12/02/2008 : 04:57:12
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The shoe has yet to fall in the credit card industry, but when it does it will make the housing crisis look insignificant.
Won't happen till the "anointed one" takes office.
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 12/02/2008 : 07:31:16
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quote:
Originally posted by redneck
The shoe has yet to fall in the credit card industry, but when it does it will make the housing crisis look insignificant.
Won't happen till the "anointed one" takes office.
>
Speaking of shoes, another big one that is still suspended in thin air is commercial real estate. If the holiday sales stink, look for retail bankruptcies early next year followed by a collapse in commercial real estate and all of the paper associated with it. |
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swusc
Penny Hoarding Member
USA
553 Posts |
Posted - 12/02/2008 : 09:51:44
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It is funny how once deleveraging starts....it is hard to stop. People move in herds. The herd is moving to exit of leverage.
Assuming CC and Commercial RE both do tank, then the current economy will look a lot worse than it does right now.
-SWUSC |
`Everybody is ignorant. Only on different subjects.' Will Rogers
"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." Alan Greenspan, 1966. |
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Credit card industry may cut $2 trillion of lines
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