Got this from a person who works in risk analysis for a credit card company:

I work for a credit card company, and I see our risk tolerance continuing to tighten, as we continue cutting lines, closing accounts, and reducing contingent liability. The huge injection from the feds has not changed our risk objectives, and now, in the holiday season, we are still cutting lines, quickly.
So are credit markets going to loosen as a result of the injection? No.
In my estimation, we are just accelerating the losses we are likely to face in 2010 from high risk accounts and taking the losses in the current-period by closing accounts prematurely. I expect this to result in a big-bath writedown for 2009 (when everyone is expecting the losses and we have federal cash to pay off the debt) ... but positions us well for 2010, 2011 . . .
In general - is the federal money (a) working to loosen credit markets or (b) going to result in increased spending, and a reversal of the deflationary pressure?
No. Not if the banks dont stop hording the cash.

categories: Understanding The Crisis

3:30 - December 3, 2008

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