And as bad as it is, a revered, and feared, bank analyst, Oppenheimer’s Meredith Whitney, has now lobbed another bombshell: Credit card issuers will withdraw more than $2 trillion in available credit over the next 18 months.
Banks’ aversion to risk has obviously risen. So they’ve been closing accounts, raising rates and lowering limits. A reader sent us a letter from American Express announcing it was lowering his limit. Being late with a payment was not one of the reasons listed, but he was popped for using his card where other customers with poor payment histories shopped.
Thursday, the Federal
Reserve is expected to announce dramatic reforms in its credit card regulations. These are expected to prohibit increasing interest rates on existing balances, except in extreme cases.
(THIS MEANS BANKS WILL CHARGE HIGHER RATES UP FRONT - THUS REDUCING THE AVAILABILITY OF CREDIT...)
While reform is clearly warranted, the new regulations, according to the Fed, will result in credit card issuers reducing credit lines by $931 billion.
(HMMM...THE FED KNOWS IT'S ABOUT TO PULL $931 BILLION IN CREDIT OUT OF THE FINANCIAL SYSTEM. STRANGE CONSIDERING THEY ARE SIMULTANEOUSLY POURING IN THE $700 BILLION TARP FUNDS)
Whitney, who predicted the financial meltdown back in October 2007, doubles down on that number.
(I TRUST MEREDITH WHITNEY MORE THAN THE FED/TREASURY RIGHT NOW....SO $2 TRILLION DOLLARS IS THE CORRECT ESTIMATE ON CREDIT REDUCTION...NOT $931 BILLION)
That would be the modern-day equivalent of what most say caused the Great Depression.
Many economists believe the central bank’s restrictive monetary policy turned a market crash and recession into the Great Depression.
Fed Chairman Ben Bernanke has been pulling every lever in sight to avoid No. 2.
But until home prices stabilize, the market recovers and consumers start spending, recovery has as much chance as the yield on that T-bill auctioned last week.
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