Ru-Row....Consumer Credit Lines To Dry Up in 2009

[LeftHander]

http://biz.yahoo.com/rb/081201/business_us_finance_research_oppenheimer.html

Article says up to a 45% reduction in consumer liquidity...

$2 Trillion will be pulled out. This is the fork getting stuck in our overcooked economy.

[Deja Q]

1. Some thought the 2008 elections would be canceled too. Ditto for 2002, 2004, 2006...

Let's see what happens before freaking out.

[LeftHander]

7. I'm a freak...I freak out....nt

[Ikonoklast]

13. I lost my business line of credit from AMEX

I got the renewal notice in October, and last month they sent out letters stating they would freeze all outstanding credit already used, and discontinue unsecured lines of credit to their customers.

The reason they gave was as they are turning themselves into a bank in order to get free money from taxpayers, they are getting out of the riskier side of credit offerings.

I never used it, but it was nice to know that if I had an unplanned expense I could have covered it just by writing a check without having to dip into capital reserves.

I'm not freaking out, but this is actually happening nationwide to many a small business.

[bigtree]

2. fear fear!

Borrow more money from China and buy some more bank stock, fast! The portfolio you save may be your own!

[Donnachaidh]

3. oh gee -- I guess people will have to live WITHIN their means now?

About frigging time.

[Mojorabbit]

15. This is going to hurt a lot of small businesses nt

[Stellabella]

16. And with falling and stagnant wages and inflation, that means

good-bye to the US economy.

People haven't been using credit cards to buy big screen TVs and iPods. They have been using them to buy food and pay medical bills.

[donco6]

22. It's not that simple for businesses.

Say you're a small business. You put in a bid for a large contract that you have the experience and expertise to handle - and lo and behold, you win.

But now you have a problem. You need to hire people to begin work on the job, but you don't have the available cash to pay them. You need to purchase supplies to plan for the job, but because the contract is so large, you need more cash to pull that off. Perhaps you even need to open another office, or put in a materials purchase order to meet the contract deadline.

What to do? Normally, you could go to a bank and ask for a loan based on a contract and business plan. This is done every single day in business. But with banks unwilling to lend, the small business owner can't even BID on contracts unless he's somehow saved up enough cash to front the entire cost prior to whatever the contract says is his first payment date. I don't know of anyone that can pull that off.

So, it's not just "living within your means."

[Missy Vixen]

26. Have you ever owned a business?

I have. If small business can't stock up on holiday items or buy merchandise ahead of need, they're no longer in business.

Then again, I'm sure some of the keyboard warriors here know much better how to do that as well.

Julie

[DJ13]

4. If the banks do that the government will need to nationalize them

Our economy that depends on consumer spending to stay alive cannot survive that much of a withdrawal of available spending.

If the banks are so weak they would go to that length they will be weak enough that the government will have to intercede and take them over to sustain economic activity.

[qb]

5. This is the problem with "self-regulation" - it happens after the damage has been done. nt

[xchrom]

6. this won't hurt the wealthy -- only the middle and lower classes.

but it's popular now to blame the vast majority.

it won't be then.

[Javaman]

10. yeah it will only hurt the ones that actually keep society moving. nt

[xchrom]

11. exactly so. nt

[Deja Q]

8. So much for the bailout, which I thought was to help keep credit open.

Mind you, this response has to be sarcasm because I don't know a frig about what's going on.

[Javaman]

9. You see, you stick a fork in something to see if it's done...

here, we need a shovel and a garbage pail.

[Idealism]

12. That is horrible, depressing news

70% of our economy is consumer purchase driven, a loss of $2 trillion in liquidity from an already precarious market place will have further disasterous effects that will ripple throughout global economies.

Sad-face :(

[LeftHander]

31. ding ding ding....!! nt

[earth mom]

14. Brought to you by the bastards who created this financial crisis in the first place.

:puke:

[nolabels]

19. They have been running the whole thing on fumes and made up numbers for quite awhile

Many of us figured this was the case. It is sort of like when the full bellied fox scampers out of the chicken-coop and declares that there are no chickens inside. There probably is more chickens inside but that ole fox doesn't want anybody else to know, he is thinking about his later meals. The people that broke it want the rest of us to believe that they, the crooks, should also be the ones to get paid for fixing it

Some kind of real collapse will have to happen before a new order can be pushed into shape. The only thing we have learned so far is how faulty their math is. Every beginning has to start where something else ends

[Mike 03]

17. Well, it also includes unused lines of credit.

For example, my mother's credit limit was $13,000 but she never came close to using that, so they cut her to $10,000.

I have a $20,000 line I never ever would think of coming close to, but it would be a smart line to cut.

My problem with this is: What if there's an emergency? That is the one reason I prefer a high line of credit. You just never know what's going to come up.

[Mike 03]

18. Unused credit lines. Check out this article.

Whitney also projected that banks will reduce unused credit- card lines by 45 percent during the next 18 months. That works out to $2.13 trillion, based on the total credit lines available from all lenders insured by the Federal Deposit Insurance Corp. as of June 30, according to the report.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a1KBBJn8ORc4&refer=home

[Scooter24]

20. I currently have two cards

One with a 100k limit and the other has no limit. I use the latter for most purchases because it has an incredible rewards and concierge service and I pay off quickly. The other is a backup for emergencies and I use it from time to time.

If my 100k line was cut I wouldn't sweat it as it isn't used as much but was just a cool card to keep around.

[Xithras]

21. I had a $20,000 credit line pulled a couple of weeks ago.

I had a BofA Visa with a $22,000 credit line and an 18% interest rate. I've had the card for 15 years, had only about a $200 balance on it, and had never been late with a payment. I got a letter from them in late November informing me that my credit line was reduced to $2,000 and my interest rate was raised to 24% because they had reassessed my "risk factors".

I sent them a check for $200 along with a letter asking them to just close the stupid thing.

[Le Taz Hot]

23. Correct me if I'm wrong here

but wasn't this bailout supposed to free up credit? :shrug:

[Idealism]

28. To free up lending between banks, yes

Not to free up credit card debt lending. It was supposed to get the LIBOR rate to move, the percent at which banks loan money to each other, because if they aren't loaning money to each other- they aren't loaning to businesses who need to make payroll or to individuals looking for private investment. Related, but not the same thing :)

[SoCalDem]

24. It HAS to..and has NEEDED to for decades

Pretty soon, more and more people will start taking stock, and will realize that they are, and have been GROSSLY underpaid..for a long time now..

EZ-Credit Plastic "replaced" wage increases, and piled on loads of debt..

The debt is in the TRILLIONS of dollars, and most people , once they get into debt, NEVER pay it off, unless they win the lotto..

Credit card debt is the last domino to fall..

I predicted that the housing bubble was the ONLY thing holding the economy together for a long time now..Once it popped, the 401-ks & stocks would HAVE to fall, because equity lines would dry up, and credit card debt would balloon, and then collapse as well...

no equity line= no "paydowns" for CC companies, followed by "re-charges"= people stop buying shit=layoffs because no one's buying the shit they import & cart around the US..

GAME OVER!

[NutmegYankee]

25. The Middle Class is about to "Get It"

All these years, cheap and easy credit has hid the nasty fact that average wages and benefits have fallen dramatically. But credit cards and the like gave the false image of prosperity to many, and allowed them to ignore what was happening right in front of their eyes. Once the credit is gone, many will see that in reality, they are now peons.

[natrat]

27. yea credit cards and tapping on home equity

[earth mom]

30. Exactly. And once families are down to a one income family when jobs start to disappear

they will see the entire scam for what it really is-the total annihilation and destruction of the middle class. :grr:

[Trillo]

29. Delay accounting rules for special folks!

Whitney also advised delaying the introduction of new accounting rules, which would bring off-balance-sheet assets back on balance sheet, until 2011 or 2012, as the primary assets that will come back are credit card loans.