Word: credit-card
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...BILLION Loans to holders of asset-backed securities, which include education, credit-card and auto loans, to jump-start consumer financing...
...sentence." He reasons that even if credit-card defaults reach a record high of 10% of the $970 billion in revolving debt, a chunk of that total will get paid off in full every month, which would result in an aggregate default of less than $100 billion. That number doesn't come near the losses that have occurred in the $14 trillion U.S. mortgage market. Moreover, credit card asset-backed securities aren't as far-reaching or as complex as mortgage asset-backed securities, and they don't have large amounts of credit-default swaps piled on top of them...
...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...
...biggest card issuers packaged more debt into securities, which they sold to investors, according to USA Today's assessment of banking records. But with credit-card defaults rising and a general "flight to quality" this year brought on by the subprime mortgage crisis, fewer outlets are willing to buy the debt. "The securitization market for credit cards was operating for the first half of 2008 but is now shut down, making it harder to securitize credit-card debt," says Arthur Wilmarth, finance professor at George Washington University Law School. Banks, forced to keep more debt on their books, are less...
...think the credit-card industry will implode," says Ronald Mann of Columbia Law. Issuers have been taking steps to mitigate risks like scaling back credit lines and closing out accounts for cardholders exhibiting distress. "Sure, they're likely to have a bad year," he says, "but lots of people will...