$70 billion loss U.S credit card companies

Discussion in 'Economics' started by talknet, Jan 2, 2009.

  1. talknet


    NEW YORK (Reuters) Dec 31, 2008-: U.S. credit card companies have little to celebrate as many analysts brace for 2009 to be one of the worst years on record for consumer credit.

    Losses for the industry could top $70 billion, but it is hard to predict how bad the pain will be.

    U.S. consumers have never before been so deeply in debt. There was nearly $1 trillion of credit and charge card debt outstanding as of October, up more than 25 percent since 2003, according to the U.S. Federal Reserve. That is in addition to $10.54 trillion in mortgage debt.

    Unemployment, already at 15-year highs, is expected to rise to its highest levels since the early 1980s, when credit cards were not nearly as widespread.

    In short, there's more debt than ever and fewer people are able to pay it.

    "In many ways, we're in uncharted territory," said John Williams, an analyst at Macquarie Research.

    Major credit losses are big trouble for Citigroup Inc, (C.N) Bank of America (BAC.N), and other card issuers such as American Express Co (AXP.N) and Discover Financial Services (DFS.N), which have seen their shares lose up to 80 percent of their value in 2008.

    The United States is not standing idly by. Citigroup received $45 billion of taxpayers' money in October and November. Bank of America has received $25 billion. American Express, which became a bank holding company, got approval last week to receive $3.4 billion from the taxpayer-funded Troubled Asset Relief Program.

    Lenders, seeing potential big losses, are trying to protect themselves by tightening credit availability, which leaves consumers with fewer options.

    This year's holiday shopping season was the worst since at least 1970, according to a report from the International Council of Shopping Centers.

    "It is hard to see the light at the end of the tunnel," Williams said.


    No credit card company is safe. According to Citigroup analysts, more than one-fourth of the credit card portfolios of Citibank, Bank of America Corp (BAC.N), Capital One Corp (COF.N), and Discover are subprime, which could lead to further losses.

    Meanwhile, American Express is heavily exposed to troubled markets with high default rates such as Florida and California, and J.P.Morgan Chase & Co (JPM.N) has to digest the portfolio of failed savings and loans company Washington Mutual.

    Together, these six companies hold around 90 percent of the total U.S. outstanding credit card debt. Continued...

  2. Because of "that", they will not be allowed to "fail". :cool:
  3. I thought "credit card" companies didn't hold the debt but acted as middle men for the transactions.

    It's the banks that will get reamed, not the credit card companies, if I understand the structure properly. The only one gets screwed is American Express as your not allowed to have a balance, except for one or two of their cards. They actually hold their debt, i.e. becoming a bank to survive.

    Anyone know if this is the correct model they run...if so, perhaps the CC companies pushed down too much because of little exposure?

  4. good

    take in the AZZ!! lol

    you been doing the F^, how's it feel to get F^
  5. yes of coarse! terrorists are destroying credit card companies because cc corp practices are not in accordance with Sharia