I think some of the most important numbers to concider here and now are the unemployment rate and the credit card default rate.
You saw yesterday that Amex showed a big increase in delinquent accounts. They are the most careful credit card when it comes to giving out credit. As
more people loss their jobs - people who are already in the hole with credit card and mortgage debt - we will see a huge increase in credit card
defaults. It will make the Lehman collapse look like a day in the park.
"Total U.S. consumer debt (which includes credit card debt and noncredit-card debt but not mortgage debt) reached $2.56 trillion at the end of 2008,
up from $2.52 trillion at the end of 2007. (Source: Federal Reserve's G.19 report, February 2009)"
If ten percent defaults on their consumer debt, that equals 256,000,000,000. Thats right 256 Billon!!! But lets be realistic. The people who are more
likely to default are the ones carrying a lot of debt. People using credit cards to make ends meet after getting laid off and the such. That probably
makes the above number much higher.
Banks like Citi and BofA have barely enough money to opperate after we already gave them billions of dollars.
Top 10 issuers of general purpose credit cards for 2008 based on outstandings
1. Chase - $183.32 billion
2. Bank of America - $166.32 billion
3. Citi - $106.74 billion
4. American Express - $88.02 billion
5. Capital One - $60.08 billion
6. Discover - $49.69 billion
7. Wells Fargo - $36.36 billion
8. HSBC - $29.36 billion*
9. US Bank - $18.53 billion
10. USAA - $16.61 billion*
(Original source: Nilson Report, February 2009)
NOTE: The outstanding dollar values listed for HSBC and USAA are slightly lower than the actual outstandings for that bank because they do not include
their American Express business. However, the discrepancy does not have an impact on the overall rankings as listed above.
Look, Chase, the only bank that seems to have been weathering this storm is extremely exposed to a credit card collapse.
edit to add:
Also, don't forget that mortgages are backed by assests, credit cards are completely unsecured debt!!! There is nothing to foreclose on.
[edit on 17-3-2009 by finemanm]