Credit Trouble Bites Consumers Hard

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Sometimes it takes experts a quarter or two to catch up with the real world. The American Bankers Association reports that during the fourth quarter of last year consumer credit payments fell behind more than they have at any time since 1992. The bucket of loans referenced includes credit cards, auto loans, and home equity lines.

According to Bloomberg "Late loans climbed 21 basis points to 2.65 percent of all accounts in a consumer-loan index created by the group." Hardly a surprise.

What is not so obvious is that the Ph.Ds hired be Wall St. have built derivatives around these segments of consumer credit just as they did with subprime loans. It is a matter of time before this paper loses enough of its value for the problems to become an issue in the quarterly reports of financial companies.

Today, no one knows what the full extent of the fall-out from these deteriorating loans may be. It is most certainly another straw on the camel’s back

Douglas A. McIntyre