There is a rather amusing story at the Financial Times tonight, “Credit card reforms ‘to cost banks billions’”. Let’s look at the particulars. The story is based on a study by law firm Morrison & Forester which concluded that banks will suffer a world of hurt if they are forced to give up practices like […]
Read more...Readers no doubt recall that the Fed announced the creation of the Term Asset-Backed Securities Loan Facility, which will lend as much as $200 billion against new or recent vintage asset backed securities collateralized by “student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration.” One wonders if the order […]
Read more...James Carville said that when he died, he wanted to come back as the bond market, that way he could intimidate everybody. If asked today, i suspect he’d ask to come back as a bank. They get all the bennies. Seriously, Amex becoming a bank? This is patently ludicrous. Amex poses no systemic risk, so […]
Read more...The consumer credit retrenchment is coming even faster and harder than many anticipated. Big box retailers look likely to get coal in their stockings for Christmas as reduced consumer credit limits cut directly into sales. From Bloomberg: Home Depot Inc., Sears Holdings Corp. and other retailers may lose as much as 8 percent of their […]
Read more...Given how overextended consumers are, and how banks have been cutting back on the cheapest piggybank, home equity loans, by slashing those credit lines, and the reports of rising delinquencies from even conservative lenders like American Express, one would think we’d also be hearing more about serious increased in credit card losses. But under the […]
Read more...It isn’t surprising to see spreads on credit card debt on the increase. In fact, it might seem odd that it has taken this long. However, one perverse effect of the 2005 bankruptcy bill is that it is easier for consumers who are not eligible for a Chapter 7 bankruptcy to walk from their mortgages, […]
Read more...Credit card companies, once having had Washington in the palm of its hand, is now facing a backlash as “gotcha” fees combined with a lot of Americans paying credit card rates that a generation ago would have landed the lender in jail (no joke, on an NPR show that I participated in, a caller said […]
Read more...In yet another example of synchronicity, Jim Hamilton provides a chart from Peter Hooper that illustrates why the housing market is in the doldrums: securitized credit has all but vanished. This topic came up in the previous post as a explanation of why the real estate market is coming to look like a war zone. […]
Read more...The latest news from American Express, that its customers are increasingly falling behind in payments, is a negative indicator for two reasons. First, the deterioration exceeded Amex’s forecasts, and comes even though the company has been aggressive in cutting credit limits to customers that look at risk of getting into difficulty. Second, the card issuer […]
Read more...Perhaps I suffer from knowing a bit too much about the financial services industry in general and credit cards in particular due to my consulting work, but I’m amazed at the eagerness of investors to go bottom fishing there. Granted, card players like Discover weren’t making subprime loans, but with prospects for the economy at […]
Read more...Oooh, the week has barely started and we’ve already had an overdose of adrenaline-generating news. Thornburg Mortgage and Carlyle Capital, both twisting in the wind, battered by margin calls, look unlikely to escape bankruptcy (Thornburg has already defaulted on financing agreements; Carlyle is seeking a standstill). Freddie and Fannie took a further beating thanks to […]
Read more...An article in Business Week, and a related discussion on the blog Credit Slips, highlight a new and nasty trend: banks are refusing to give overstretched borrowers who negotiate repayment plans through credit counselors the interest rate breaks they once did. In the old days, banks would reduce interest rates on balances due, sometimes to […]
Read more...Adam Levitin at Credit Slips has been looking at bankruptcy fillings lately, and they confirm his worst suspicions about the credit card industry: I’ve seen a bunch of cases with upwards of $60,000 of debt for a single debtor, a few with over $100,000, and the current record holder is $175,862.27. Yes, that’s right, $175,862.27. […]
Read more...A couple of interesting sightings that indicate how profitable credit cards by showing how much new entrants are willing to spend to enter the business (and obviously still believe they can generate a decent return). First, from Elizabeth Warner at Credit Slips: If you ever wondered just how profitable credit card lending can be, take […]
Read more...Readers probably know that the changes in the bankruptcy law, which went into effect in October 2005, were a victory for the credit card industry, which had lobbied for tougher rules for years. I had very little sympathy for the banks, since credit cards were an extremely profitable business even under the old law, and […]
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