After $1tn cost of housing collapse, America is now bracing itself for the credit card bill - by Dan Milmo
The question now is how resolute is the government's determination to soak up the cost of holding up the system. With recession under way, analysts fear more home loans, credit card debt and even private equity deals will go bad. "The worry is that unemployment will rise and people will not be able to service their consumer borrowings as well as their mortgage," says Brian Gendreau, an investment strategist with ING Investment Management in New York. The assumption markets appear to have made last week, that the US authorities will step in, will have alarmed any US taxpayer who read a note last week by Meredith Whitney, the Wall Street analyst who predicted the near-collapse of Citigroup. The Oppenheimer & Co analyst estimates the $110bn of Tarp funds drawn by Bank of America, Citigroup, JP Morgan, Wells Fargo, Goldman Sachs and Morgan Stanley will be consumed by further writedowns and replenishing reserves endangered by yet more bad loans. The banks are forecast to incur $44bn in impairment charges and credit-card-related provisions in the final quarter this year. "Overall we do not believe these capital raises will spur meaningful growth for the industry," she wrote in a note, titled "Gobble Gobble" in allusion to banks' appetite for government capital.
No comments:
Post a Comment