Comments on: Quelle Surprise! Credit Card Delinquencies Rising

By: Let It Sink

Let It Sink — Fri, 28 Mar 2008 15:04:00 +0000

The models may not incorporate this, but it seems to me that if a person is getting behind on a mortgage that is for more than the home is worth, and is seriously looking at defaulting and then bankruptcy, that he might go ahead and max out the credit cards before pulling the plug. If you have no intention of paying any of it back, you might as well go for broke. I guaranty that this is the calculation that is being done by millions of people right now. And when they pull the plug, we’ll have another financial risk model ready for the garbage bin.

By: Anonymous

Anonymous — Fri, 28 Mar 2008 04:32:00 +0000

I’m curious what the media balance is on the delinquent accounts. Anyone else?

By: Anonymous

Anonymous — Fri, 28 Mar 2008 04:12:00 +0000

“Despite that deterioration, however, credit card ABS collateral delinquencies are still well within the normal historical range, and the ratings on credit card ABS senior tranches appear to be safe for now.”

AAA MBS tranches are also safe. And housing prices only ever go up. And Bear Stearns does not have a liquidity problem.

By: foesskewered

foesskewered — Fri, 28 Mar 2008 02:28:00 +0000

jm, just wondering, are you also referring to the practice of merely making minimum payments per month, avoiding further punitive interest but not quite paying off any significant amounts.

That makes the visa IPO all that cleverer, shareholder banks get to book profits but deal with the credit card delinquency risk later. However should problems emerge there will be even less justification for any bailout measures however small they may be.

By: Anonymous

Anonymous — Thu, 27 Mar 2008 23:54:00 +0000

One other thing to consider is that unemployment data are under-counting the real number of unemployed. There are other indicators of slowing employment, for example, daily data on tax witholding from the US Treasury, and states sales tax collections from the US Census. Those indicators show deterioration of income and expenditures by the consumer over the last year, especially in the fourth quarter.

By: jm

jm — Thu, 27 Mar 2008 23:13:00 +0000

Seems likely the draconian penalties for late payments will keep people paying their credit cards on time as long as they can — and certainly before their mortgages, with all the bailout talk abroad.

But a consequence may be that if (when?) stress builds to where they just can’t pay at all, there’ll be a flood of delinquencies, and on large balances.

By: S

Thu, 27 Mar 2008 22:38:00 +0000

Some noise/compression in the numbers as bankruptcy reform took hold. Neverthelss, most card companies are looking for 5-5.5% charge offs with the tail risk it spieks to 7-8%. The incremental would cost card comapnies approx $30 billion given where they are provisioning to at the moment. A drop in the bucket, but still on a tangible equity basis this would erase the equity at WB and WFC (each).