The Next Credit Crunch
February 25,2009 
Arianna Huffington explains the next stage in the economic meltdown. Credit card debt:
As more and more Americans default on their credit card debt, banks
will find themselves faced with a sickening instant replay of the toxic
securities meltdown from the mortgage crisis. In another example of
Wall Street "creativity," credit card debt is routinely bundled
together into "credit-card receivables" and sold to investors — often
pension funds and hedge funds. Securities backed by credit card debt is
a $365 billion market. This market motivated credit card companies to
offer cards to risky borrowers and to allow greater and greater amounts
of debt.
As these borrowers continue to default, banks and the investors who
bought their packaged debt will take a serious hit. And how are the
credit card companies trying to offset the rise in bad debts? By
raising rates on the rest of their customers — making it likely that
more of them will end up defaulting, causing even more losses for the
banks. And round and round and round we go.
Arianna Huffington explains the next stage in the economic meltdown. Credit card debt:
As more and more Americans default on their credit card debt, banks
will find themselves faced with a sickening instant replay of the toxic
securities meltdown from the mortgage crisis. In another example of
Wall Street "creativity," credit card debt is routinely bundled
together into "credit-card receivables" and sold to investors — often
pension funds and hedge funds. Securities backed by credit card debt is
a $365 billion market. This market motivated credit card companies to
offer cards to risky borrowers and to allow greater and greater amounts
of debt.
will find themselves faced with a sickening instant replay of the toxic
securities meltdown from the mortgage crisis. In another example of
Wall Street "creativity," credit card debt is routinely bundled
together into "credit-card receivables" and sold to investors — often
pension funds and hedge funds. Securities backed by credit card debt is
a $365 billion market. This market motivated credit card companies to
offer cards to risky borrowers and to allow greater and greater amounts
of debt.
As these borrowers continue to default, banks and the investors who
bought their packaged debt will take a serious hit. And how are the
credit card companies trying to offset the rise in bad debts? By
raising rates on the rest of their customers — making it likely that
more of them will end up defaulting, causing even more losses for the
banks. And round and round and round we go.