Tweet
The credit crunch has plagued much of 2008, and Ezra Becker, principal consultant for TransUnion Financial Services, expects credit conditions to continue to deteriorate in the new year.
“The biggest story is really with mortgages,” said Becker. His firm, which has a database of 27 million anonymous consumer records, projects delinquencies will reach their highest levels since 1992.
17 Year High |
|
| By: Ari Thursday January 1, 2009 1:23 pm | |
2 Comments
The article implies that consumer credit is the issue, and it’s not. The real problem has been that banks won’t lend to each other. Many banks have much of their balance sheets filled with potentially toxic mortgage backed securities that have been sliced, diced and resold so many times that no one can tell what banks are actually solvent. So they won’t lend to each other for fear of being stuck with a partner that may not be able to perform.
Bad mortagages are an issue, to be sure. But that’s a familiar issue that banks of all types know how to resolve.
What’s new is the lack of inter-bank confidence caused by the use of various unregulated, exotic poorly-understood financial instruments based on mortgages. And that’s not getting near enough attention.
It took another Bush to equal the economic failure of the first.