When I posted this about 2 weeks ago, 17 reasons America needs a recession, I still searched for the current post’s data. The title to that post now is “One reason America is getting a recession.” The train wreck is speeding up to a “cornfield meet.” Oh, the pain-the pain! It is not just the citizenry; the government has it’s mammary in the wringer too.

Talk of Worst Recession Since the 1930s

Unpaid Credit Cards Bedevil Americans

SAN FRANCISCO (AP) - Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come. [snip]

“Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa,” said Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. “We’re starting to see leaks now.” [snip]

Serious delinquencies also are up sharply: Some of the nation’s biggest lenders - including Advanta, GE Money Bank and HSBC - reported increases of 50 percent or more in the value of accounts that were at least 90 days delinquent when compared with the same period a year ago. [snip]

Investors also are backing away from buying securitized credit-card debt, said Moshe Orenbuch, managing director at Credit Suisse. But that probably has more to do with concerns about the overall health of the U.S. economy, he said.

“It’s been getting tougher to finance any kind of structured finance - mortgages, automobile loans, credit cards, student loans,” said Orenbuch, who specializes in the credit industry.

Capital One Financial Corp. (COF) reported that delinquencies and defaults are highest in regions where troubled mortgages are concentrated, including California and Florida.

Among the trusts examined, Bank of America Corp. (BAC) had the highest delinquency volume, with overdue accounts valued at $5 billion. Bank of America defaults in October were almost 200 percent higher than in October 2006.

A spokesman for Charlotte, N.C.-based Bank of America declined to comment.

Other trusts - including those linked to Capital One, American Express Co. (AXP), Discover Financial Services Co. and those containing “branded” cards from Wal-Mart Stores Inc. (WMT), Home Depot Inc. (HD), Lowe’s Companies Inc., Target Corp. (TGT) and Circuit City Stores Inc. (CC) - also reported striking increases in year-over-year delinquency and default rates for October. [snip]

“You’re looking at more and more distress - consumers desperately trying to preserve their credit lines, but there’s nowhere else to go,” said Robert Manning, director of the Center for Consumer Financial Services at Rochester Institute of Technology. “It’s like a game of dominoes.”

When (not if) housing prices drop, many who bought and still make payments will face houses not worth the mortgage, aka being upside down. Do they walk away or continue to overpay? What would you do?

Ask any homeowner what their house’s value is; you’ll get answers like $200,000, perhaps $400,000 or some other number. The correct answer is “Whatever someone else is willing to pay for it.” Will that be what you owe?

Town clerks become inundated with reappraisal requests to lower property taxes; what’s that going to do to the school budget, road maintenance and fire/police protection? From where does the money come for all the liberal programs so dearly loved? Lost tax revenue curtails borrowing for essential projects. The impact on the local, state and federal level leaves bad choices. Raise taxes and kill the goose. Print money and produce inflation rivaling Zimbabwe. Cut spending and kill the socialist programs. (Well, that’s not a bad choice)

On the corporate side, somehow the money lost through credit cards needs correction. Do companies go bankrupt, downsizing or closing altogether? Either way, people are let go which contributes to more delinquencies in mortgages and unsecured debt. Then the stocks take a hit wiping out investments unless you are ahead of the curve and sold.

Since the Federal Government is the worst offender, would someone enlighten me as to how the Feds can solve the problem?

Archived in: California, Economy, Education, Housing, Property Taxes, Socialism, Taxation, Taxes