Banks tightening the screws on consumers

The banking crisis in the U.S. is taking on a significant turn for the worse as banks tighten the screws on consumers. With banks facing record writedowns to their equity capital, they are looking to limit their exposure to the mortgage market. The latest salvo in this battle is banks terminating unused lines of credit for homeowners. This reduces the ability for cash-strapped consumers to get their hands on money as the U.S. economic downturn takes hold.

To my mind, this is a very significant development because it demonstrates that all of the financing available to consumers is being ratcheted back significantly. Credit Cards will be the last bulwark for desperate consumers against catastrophe. Expect to see increases in revolving lines of credit and credit card delinquencies.

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