Have we reached a bottom?

Could securitized card card receivables and auto loans have as much of a problem as subprime? Don’t get me wrong I think these are toxic assets with zero collateral on card cards and depreciating collateral on auto receivables, but my thinking is that what people borrow on credit cards and cars is a tiny fractions of what people borrow for a house, thus less value on the securities to write down. Also, wouldn’t the value of these securities have already been written down by now? I think tighter credit will cause pain for retail and car dealers but I can’t think of how these securities could have a macro level destabilizing effect.

You bring up a good point about the size of housing debt vs. the size of credit card debt. Anyone know what the outstanding notional value of MBS vs cards and autos are? Although the notional numbers are smaller, the chance of close to 100% losses are substantially higher, if these things produced leverage on top of leverage, it could still be very bad. That’s the issue from the value of the ABSs. I suspect that the value of those securities is not the main problem with cards and autos, though it’s something to consider. Instead, it has to do with whether the consumer has anything left that they can spend. Without that, company earnings are likely to fall substantially and there won’t be much operating profits left over to make stock prices rise.

The problem is credit cards have become a way of life. My sister is living off her credit cards to keep her house. So: 1. There might be a ripple effect. You go bad on your credit cards followed by your house 2. If someone gets foreclosed, it takes a while, then they rent somewhere else or get a house of a lower means If they are surviving on a credit card, they have a net deficit. This won’t be easy to get rid of. 3. Foreclosures do get some $$. Maybe 50% of an asset’s value. Credit card will be much less because of bk law… edmund_lord Wrote: ------------------------------------------------------- > Could securitized card card receivables and auto > loans have as much of a problem as subprime? > Don’t get me wrong I think these are toxic assets > with zero collateral on card cards and > depreciating collateral on auto receivables, but > my thinking is that what people borrow on credit > cards and cars is a tiny fractions of what people > borrow for a house, thus less value on the > securities to write down. Also, wouldn’t the > value of these securities have already been > written down by now? I think tighter credit will > cause pain for retail and car dealers but I can’t > think of how these securities could have a macro > level destabilizing effect.