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Posted by: Michael Mandel on December 24
The Associated Press carried this story yesterday:
SAN FRANCISCO (AP) — Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.
The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP. That represented more than 4 percent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart.
Investors also are backing away from buying securitized credit-card debt, said Moshe Orenbuch, managing director at Credit Suisse. But that probably has more to do with concerns about the overall health of the U.S. economy, he said.
“It’s been getting tougher to finance any kind of structured finance — mortgages, automobile loans, credit cards, student loans,” said Orenbuch, who specializes in the credit industry.
At some point very soon, the credit card companies will decide that they are losing money on the marginal customer—and then we will see a reduction in the amount of credit that they are willing to give Americans. It will not be pretty.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.