Word: auto
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Treasury Secretary Henry Paulson's latest plan for the $700 billion bailout fund has many economists responding like Seinfeld's Soup Nazi, "Next!" They say the idea of using funds approved by Congress in early October to stimulate credit card and auto lending is ill advised and unnecessary...
...What's more, industry watchers say credit card and auto lending has actually held up quite well despite the credit crunch. According to market research firm Synovate, the average consumer probably has a higher limit and therefore can spend more on their credit card than they could a year...
...cost funds and share in the $700 billion bailout pool, it's clear that even traditionally resilient industries like credit cards are feeling pressured. "Credit cards are in line to fall," says Adam Levitin, associate law professor at Georgetown University. "The question is whether they will beat out the auto industry - they're racing for the honors...
...with the auto industry in Detroit, some of the credit-card industry's current problems have been years in the making. Over the past decade, U.S. households have been loading up on debt, with credit-card balances rising 75% since 1999. Yet families' real wages have increased only slightly - by just 4% during that same time period, according to Innovest. The savings rate has similarly declined relative to credit-card balances. Meanwhile, home equity, the biggest source of wealth for most families, has been drained by the mortgage crisis. "There isn't a cushion for anyone who has a bump...
...there is plenty of talk about putting these issues on parallel tracks. But it is hard to see how he can afford such expensive undertakings alongside a $700 billion federal bailout of the financial system (which Obama now wants to extend to the collapsing auto industry) and a new economic-stimulus package...