House of Cards

Don’t miss “House of Cards: Why Analysts Fear $1 Trillion Credit Card Market Could Be Next Crash” by Martha C. White in the 1/21/09 issue of The Washington Independent.

Credit Card Industry Not Looking Good in 2009

You’ve seen the Capital One commercials in which dumb thugs dressed in chain mail and carrying broad axes do random damage. The question asked is, “What’s in your wallet?”.

Before the current economic crisis, those commercials were (at best) cute. But even in good days, the commercials seemed to hint at a mixed message. Now, the Viking-like thugs have taken on an ominous tone.

Without questions, credit card companies are hurting. Perhaps it’s the pendulum of justice that swings through the universe. Did they put too many cards in too many card holder’s wallets. Or perhaps the credit card corporations have offered too much credit to the uncredit-worthy at huge interest rates for so long that it’s coming back to bite them. Battle axes and swords cut on both sides.

In, “Credit card industry faces tough 2009, Capital One loss suggests challenges for rivals like American Express“, MarketWatch is reporting on the difficulties the credit card industry faces in 2009. It’s not a pretty picture.

In “What’s In Your Wallet … Deadbeat“, Barron’s reports net charge-offs increased to 7.71% in December.

2009 is not setting up to look good for the credit card industry.

The Pop is Going to Hurt

“Credit Card Debt: This Popping Bubble is Really Going to Hurt“, an article in AlterNet’s Corporate Accountability and WorkPlace news, offers a fairly complete perspective of what we face in terms of the credit card bubble.

Most telling are the comments of readers. They range from “pay off your credit cards as soon as you can” to “what if we all default at once?” If nothing else, the comments offer a sample of what many are thinking about the credit card bubble.

A Return to Traditional Banking Business

Jamie Dimon, chief executive of JPMorgan Chase, was interviewed by the Financial Times about his take on 2009.  In “JPMorgan chief says 2009 will be bleak“, Mr. Dimon says, “we expect consumer loans and credit cards to continue to get worse.”

Mr. Dimon suggests the bursting of the credit bubble will change the banking industry by forcing a return to the traditional banking business of advising and lending.

I wonder, though.  Isn’t the advice and lending behavior of banks part of what got us into this?  It sounds like more of the same.