Monday, December 1, 2008

Meridith - Still Good For A Big Bear Day


In the face of expanded holiday shopping over Black Friday, rising real disposable income, and massive oil price decline, upcoming stimulus (probably including 'retail' tax cuts), today we suddenly realize that banks may pull credit lines?

Clearly, the bears are just out today to grab any "rally food" they can, right? I mean, apart from China's turnabout and Hank "Menace to the Markets" Paulson coming out to say that he was, after another week, still studying the problem of preventable foreclosures.

If anything, the message is clear that the banks cannot try to write the best vintage "loans" during the immediate crisis, without risking the very downturn that they would hope to forestall, collectively, right?

Average margins in the credit card business are on the rise. There is $200 billion in cheap financing from the Federal Reserve available. At 2/3rds of an entire year's volume, that's a fair amount of flash-money at the margin, even if it is unnecessarily restricted to 'AAA' credit only, IMHO.

Willingness to lend is a serious concern that needs to be addressed.

Potentially a more serious, long-term adjustment is the large number of people who may get shut out of the consumer credit markets, because our current Treasury Secretary and his boss have decided that the best way to handle the housing market bubble is to "let foreclosures work". For the average lender balance-sheet, I'd bet that the average REO is an order of magnitude larger than the average credit card balance.

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