Consumer Law

Worst yet to come?

By Christopher Peterson

The New York Times published a gloomy anonymous email from a banker castigating his own industry yesterday.  The banker predicts further bank collapses as more credit card receivables go into default. The banker makes the point that credit card divisions in banks rely on stated income and assets in much the same way that the mortgage industry relied on "liar" loans and are continuing to aggressively market high cost debt to those that cannot repay it.

In general, my impression has been that credit card lenders have been more sophisticated in managing default risk because they lacked the cushion of collateral. Moreover, unlike mortgages, credit card portfolios were not so obviously exposed to an asset bubble.  Still, as the recession spreads and Congress continues to sharpen moral hazard with financial institution give-aways (irrespective past consumer abuse) one cant help but wonder.

Full post as published by CL&P Blog on November 26, 2008 (boomark / email).