Thursday, October 11, 2007

Credit card debt is ready to blow

From the Baltimore Sun:

After every financial crisis over the past 10 years, the Federal Reserve has cut interest rates and pumped money into the economy. Each rescue solved the problem - and created a new one.

The next bomb from this chain reaction of bailouts and blowups will be credit-card debt. Hardly anybody is talking about it yet, but banks and consumers are laying the ground for a wave of credit-card defaults, bankruptcies and asset write-offs for 2009 or so.

Regulators and investors have discouraged excessive mortgage lending, so banks are turning to credit cards as the next growth business. They're starting to raise credit limits, lower lending standards and increase recruitment. And now that they can't borrow against homes so easily, consumers are borrowing more against plastic - even to meet higher, adjustable mortgage obligations that they can't handle from their income.

This can end only one way. The only question is how bad it will be....MORE