August 13, 2009
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News: Bankruptcy City!
The rate of credit card defaults isn't expected to subside anytime soon. Last month alone, some 126,000 consumers filed for bankruptcy. That's 34% more than last month. The ABI Research Group reports expected projections approaching 1.4 million by year's end. The first six month of this year alone reached 675,351, a 36% jump from before. These statistics were drawn from the National Bankruptcy Research Center. Samuel Gerdano, Executive Director of ABI, further explains “"Rising unemployment on top of high pre-exiting debt burdens is a formula for higher bankruptcies through the end of this year." No way people are going to be able to manage the large credit card debt they had built up from before these times. Credit card issuers are looking for a rough road on Wall Street this year.
This blight isn't just levied on the poor any more. Even celebs like actor Stephen Baldwin and Major League Baseball All-Star Lenny Dykstra have fallen. Baldwin was losing his home and filed to avert foreclosure. Dykstra filed for Chapter 11 after racking up between $10 million and $50 million worth of unplayable debt. All these filings are crushing all hopes of a speedy recovery of the credit card issuing banks. JPMorgan/Chase were one of the hardest hit. Even after posting a second-quarter rise in profit on investment banking fees. Jamie Dimon, CEO of JPM says he doesn't expect to see a profit on the credit card end either this year nor next.
The original JPMorgan/Chase credit card accounts portfolio is forecast to be a10% loss for next quarter. The Former WaMu credit card accounts are looking much worse. Their losses may approach 24% by the end of 2009. The credit card losses for last quarter were $672 million. Also beating them up were the Home-equity charge-offs and Prime mortgage defaults. All this in the wake of the Bankruptcy Abuse Prevention and Consumer Protection Act, passed by Congress back in 2005. The intent was to hedge the banks against unwarranted bankruptcies which would deny the banks from collecting uncollateralized debt. With this legislation, it became necessary for a bankruptcy filer to pass a means test before wiping out debt.