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Or do they. Seems all the "good news/bad news over consumer debt may have been just more FIRE hogwash....
Bank Losses Lead to Drop in Credit Card Debt
By CHRISTINE HAUSER
The substantial drop in credit card debt in the United States since early 2009 has been widely attributed to newly frugal consumers. But analysts say that a significant portion of the decline is actually the result of financial institutions writing off billions of dollars in credit card debt as losses.
While consumers have done their part by shying away from exceeding new credit limits and turning increasingly to debit cards, the question is to what extent are consumers voluntarily reducing their balances, and to what extent are banks making the decision for them.
The answer has wide implications for the broader economy as banks try to determine whom to extend credit to — and how much — and as businesses try to adapt to the changes in consumers’ spending patterns.
“There is a lot of debate going on right now among economists,” said Cristian deRitis, the director of credit analytics with Moody’s Analytics, which is studying the issue. “Is there truly deleveraging or are charge-offs removing a lot of balances?”
Outstanding revolving accounts, mostly credit cards, declined to $832.2 billion from $915 billion in that same period, the Fed said in a separate report earlier in the month.
But economists said they were trying to calculate how much of the drop in credit card debt was the result of banks writing it off — charging off, in bank parlance.
Mr. deRitis, of Moody’s, said he was examining the credit card accounts of individual borrowers. He said he expected to learn which borrowers were voluntarily paying down their debt, which were taking on new debt, and to what extent existing borrowers were curtailing balances by paying more than the minimum.
While the study is not yet complete, Mr. deRitis said it appeared so far that most of the overall decline is in the form of charge-offs.
“There clearly is a differential impact with defaulting borrowers having greater difficulty finding credit in the future,” he said. “Nondefaulting borrowers are reducing their overall credit exposures but not at an especially rapid pace, given stagnant incomes and wealth.”
“Bottom line — we are becoming more of a polarized set of consumers,” Mr. deRitis added.
http://www.nytimes.com/2010/09/25/bu....html?_r=1&hpw
Debt? That's Pa's department...
Bank Losses Lead to Drop in Credit Card Debt
By CHRISTINE HAUSER
The substantial drop in credit card debt in the United States since early 2009 has been widely attributed to newly frugal consumers. But analysts say that a significant portion of the decline is actually the result of financial institutions writing off billions of dollars in credit card debt as losses.
While consumers have done their part by shying away from exceeding new credit limits and turning increasingly to debit cards, the question is to what extent are consumers voluntarily reducing their balances, and to what extent are banks making the decision for them.
The answer has wide implications for the broader economy as banks try to determine whom to extend credit to — and how much — and as businesses try to adapt to the changes in consumers’ spending patterns.
“There is a lot of debate going on right now among economists,” said Cristian deRitis, the director of credit analytics with Moody’s Analytics, which is studying the issue. “Is there truly deleveraging or are charge-offs removing a lot of balances?”
Outstanding revolving accounts, mostly credit cards, declined to $832.2 billion from $915 billion in that same period, the Fed said in a separate report earlier in the month.
But economists said they were trying to calculate how much of the drop in credit card debt was the result of banks writing it off — charging off, in bank parlance.
Mr. deRitis, of Moody’s, said he was examining the credit card accounts of individual borrowers. He said he expected to learn which borrowers were voluntarily paying down their debt, which were taking on new debt, and to what extent existing borrowers were curtailing balances by paying more than the minimum.
While the study is not yet complete, Mr. deRitis said it appeared so far that most of the overall decline is in the form of charge-offs.
“There clearly is a differential impact with defaulting borrowers having greater difficulty finding credit in the future,” he said. “Nondefaulting borrowers are reducing their overall credit exposures but not at an especially rapid pace, given stagnant incomes and wealth.”
“Bottom line — we are becoming more of a polarized set of consumers,” Mr. deRitis added.
http://www.nytimes.com/2010/09/25/bu....html?_r=1&hpw
Debt? That's Pa's department...