Credit Card Companies To Cut Consumer Lines of Credit By 45 Percent
Dec 1st, 2008 | By Rob | Category: Uncategorized
Analyst Meredith Whitney today predicted that credit card companies would cut open credit lines for American consumers by $2 trillion dollars over the next eighteen months. That’s 45 percent of the available credit for consumers. You can read more about her prediction at CNBC or Bloomberg.
It is unfortunate that credit card companies will be cutting back on open lines of credit at the same time that they are being loaned money by the federal government in order to strengthen their capital reserves and promote lending. The tightening of credit card lines is likely to further hamper efforts to promote recovery among the automakers, retailers, homebuilders, and financial institutions.
In her interview broadcast on CNBC, Whitney stated that credit card reform might be one factor in the decision by the credit card companies to cut available credit. While financial industry representatives criticized reform efforts back in May with the argument that it would make credit more expensive for all, I doubt even they would have predicted these drastic cutbacks in financial lending.
Let’s hope the American public’s investment in the financial institutions and asset securitization plan buys some leniency from the decreased credit lines. Otherwise, the auto bailout hearings tomorrow may not be the last time that an industry testifies before Congress with the goal of preventing the complete collapse of a segment of the American economy.
