Credit-card industry may cut $2 trillion lines: analyst

[dkf]

(Reuters) - The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

"In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent."

Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz), Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) represent over half of the estimated U.S. card outstandings as of September 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.

Closing millions of accounts, cutting credit lines and raising interest rates are just some of the moves credit card issuers are using to try to inoculate themselves from a tsunami of expected consumer defaults.

http://www.reuters.com/article/topNews/idUSTRE4B01HI20081201

[coalition_unwilling]

1. Prepare yourself for 25% adult

unemployment and bread lines (and hyper deflation). A move such as this will crush aggregate demand.

[dkf]

2. It is now imperative to keep up on credit card payments...

I hope people take advantage of auto pay options to make at least the minimum payment. Banks are looking for a reason to cut. This is scary.

[tularetom]

3. Tightening credit in a recession? No wonder we're in such deep shit

The Fed is talking about lowering the prime rate to zero and these assholes are looking for ways to NOT lend anymore money?

In the long run it won't save 'em. Either the consumers charge things they can't pay for or they don't charge anything at all. Either way the "credit card industry" is tits up.

And doncha love the phrase "credit card industry"? What a sad attempt to pretend we still have some sort of industry here.

[dkf]

4. It is sad but our economy depends on everyone spending spending and spending.

Someone made a point earlier that investors don't want asset backed securities which makes it even harder for banks to keep up the lending.