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february 4,2009

  • Brave New CC World, Pt.2
     – New building codes for the CC Industry.


    So, what's the bottom line on the ‘perception effect'? We should expect to see more difficult times with credit card availability. Credit card lenders will have to offer fewer perks and heighten qualifying standards. As more and more existing credit card accounts fall into default, as they surely will, bad ‘perceptions' will increase.

    The stimuli' packages will, eventually, create a brave new and stout credit card infrastructure but, for the time being, there will be construction delays. Demolitions of the old foundation will have to precede construction of the new credit card industry infrastructure. Already, we have some figures to measure by:

    • Lending Standards: 60% of the lending banks are tightening standards.

    • Credit Limits: 30% of the lenders will lower limits on things like credit card borrowing.

    • Qualifying Credit Scores: 45% of the credit card institutions will raise minimum credit score qualifications.

    Well, "Where's my quarter?", you may ask. Billions of bailout dollars awarded and fewer loans as a reward. To understand this paradox, we have but to view the big picture, as a whole. Eight years of neglect in government regulation can't simply be erased by new intentions. First, we have to endure the aftermath (like Katrina victims can tell you). We must rebuild using stricter building codes like, having enough money set aside to weather the storm without facing probable collapse. Thanks to the multi-billion-dollar levy and drainage systems from the bailout, we can survive the rising tidewaters of the mounting credit card loan default index. We also must be mindful not make the same mistakes again of not setting enough reserve aside for the future, so never need another bailout.

    To boot, the credit card industry is in dire need of restoring public confidence. Only then, will the naysayers be negated by common sense. The credit card lenders must be able to report positive quarterly earnings soon or Wall Street will wipe them out. ‘Protective regulation' is an anathema to pure capitalism so, they must ‘play the game' to survive.

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