Credit crunch hits autos, students and homes

McClatchy has an article out today showing that the credit crunch is hitting all sorts of consumer credit now. The crisis that began as one ‘contained’ to subprime, now has branched out into auto loans, credit card debt, student loans, home equity loans and all manner of credit.

“The credit crisis triggered by bad home loans is spreading to other areas, forcing banks to tighten credit and probably extending the credit crisis that’s dragging down the economy well into next year, and perhaps beyond.

That means consumers are going to have an increasingly difficult time getting bank loans for car purchases, credit cards, home equity credit lines, student loans and even commercial real estate, experts say.

When financial analyst Meredith Whitney wrote in a report last October that the nation’s largest bank, Citigroup, lacked sufficient capital for the risks it had assumed, she was considered a heretic.

However, Whitney was proved correct: Citigroup pushed out its CEO, sought foreign investors and slashed its dividend. Her comments now carry added weight on Wall Street, and she has a new warning for ordinary Americans: The crisis in credit markets is far from over, and it increasingly will affect consumers.”
–McClatchy, 8 Jun 2008

Does anyone think this economy’s not going to experience the mother of all slowdowns. Bush and co. are trying to keep up the happy talk. I’m not buying.

And with Banks being hit hard by the crisis, they are not going to be excited to lend.

Related Articles
U.S. Households to Receive Less Credit, Barron’s, 10 Jun 2008

“The growth of household debt during the past 20-plus years is one of the most glaring aspects of the American economic scene. Households have borrowed so aggressively, that each year their assets covered less of their liabilities. For a while, rising levels of income justified, perhaps, the added leverage. For example, between the early 1950s and 1980s, though assets fell from 14 times debt to only about eight times debt, household incomes rose sufficiently enough to keep up with the growing accumulation of debt, so that debt-to-income measures remained about flat. But after the mid-1980s, things changed. At that point, debt started to rise relative to assets and income both.”

Great article, but paid site.