Rising rates are accelerating credit-card defaults and soured debt could further undermine the financial system. The troubles sound familiar. Borrowers falling behind on their payments. Defaults rising. Huge swaths of loans souring. Investors getting burned. But forget the now-familiar tales of mortgages gone bad.
The next horror for beaten-down financial firms is the $950 billion worth of outstanding credit-card debt—much of it toxic. That's bad news for players like JPMorgan Chase (JPM) and Bank of America (BAC) that have largely sidestepped—and even benefited from—the mortgage mess but have major credit-card operations. They're hardly alone. The consumer debt bomb is already beginning to spray shrapnel throughout the financial markets, further weakening the U.S. economy. "The next meltdown will be in credit cards," says Gregory Larkin, senior analyst at research firm Innovest Strategic Value Advisors.
Do you think that U.S. Treasury dept.'s $700 billion mortgage bailout won't be a lifeline for credit-card issuers?
How they will manage their risk?
The next horror for beaten-down financial firms is the $950 billion worth of outstanding credit-card debt—much of it toxic. That's bad news for players like JPMorgan Chase (JPM) and Bank of America (BAC) that have largely sidestepped—and even benefited from—the mortgage mess but have major credit-card operations. They're hardly alone. The consumer debt bomb is already beginning to spray shrapnel throughout the financial markets, further weakening the U.S. economy. "The next meltdown will be in credit cards," says Gregory Larkin, senior analyst at research firm Innovest Strategic Value Advisors.
Do you think that U.S. Treasury dept.'s $700 billion mortgage bailout won't be a lifeline for credit-card issuers?
How they will manage their risk?