Later On

A blog written for those whose interests more or less match mine.

The Rich stop paying their bills

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Mary Kane of the Washington Independent notes another sign of hard times a-coming:

Even more affluent consumers are failing to pay their mortgages and credit card bills on time, the Financial Times reports. JPMorganChase chief executive Jamie Dimon told Wall Street that the outlook for prime mortgages was “terrible,” and American Express said its safest and most profitable borrowers are paying late, the Times said. Second-quarter results for banks and financial institutions show losses from once-dependable customers hit by rising gas costs, falling house prices and the slowing economy.

Both firms, along with other banks and lenders, are tightening credit across the board as a result. From the FT:

The crisis is just starting to spread beyond the middle class,” said Curtis Arnold, founder of “Even folks with good credit-ratings scores are no longer immune from adverse actions from their card issuers.”

The tightening to consumers mirrors what is happening on the commercial side, the New York Times said. Banks taking big losses on commercial real estate are cutting back on lending overall, even to businesses with solid bottom lines. That means banks are withholding credit from companies that need capital to expand, which can begin to cripple the economy.

This is the classic pattern of a credit crunch. Banks and lenders get stung by defaults on loans to risky customers, so they curtail lending to everyone. It’s the worst-case scenario of the credit crisis becoming a reality. As Calculated Risk likes to say, we’re all subprime now.

Written by LeisureGuy

29 July 2008 at 11:17 am

Posted in Daily life

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