Bankruptcy

What the Credit Crunch Looks Like

By Adam Levitin

The Maryland suburbs where I live have been fairly insulated from the economy's problems overall.  The federal government provides a steady economic anchor for the region, so we aren't too badly hit with layoffs.  We don't have a major negative equity problem in the close-in suburbs, and not too many foreclosures.  And yet here, over the past few days the economic grim reaper's work is evident:  several GOB sales in downtown Bethesda, numerous 60% off clearance sales, and my bank branch has cut all weekend hours.  I've seen several stores that are noticeably poorly stocked, and visibly fewer shoppers in a lot of stores.  I can only imagine how much worse it must be in some parts of the country.  

But anecdote isn't the singular of data, so let me show a data graphic (from Carddata.com) that charts the credit crunch quite visibly:  the involuntary attrition rate on credit cards.  This is the annualized percentage of card accounts outstanding that have been closed by the card issuer.  That is, these are lines of credit that have been revoked.  Note that starting in the summer/fall of 2007, card issuers began ruthlessly eliminating lines of credit, while consumers stopped closing their accounts voluntarily.  This is a picture of consumers wanting credit and financial institutions turning off the spigot.  I'll leave the issue of whether or not this was wise for another day, but let the graph speak for itself.    

Full post as published by Credit Slips on February 07, 2009 (boomark / email).