Author Topic: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)  (Read 7568 times)

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Offline Wretched Excess

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we saw this coming, and now it's here  we went from mortgages to car loans to credit cards. :thatsright:  now I'm sure that they didn't have this thing diagnosed before they threw money at it.

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Paulson Shifts Focus of Rescue to Consumer Lending

Nov. 12 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson plans to use the second half of the $700 billion financial rescue program to help relieve pressures on consumer credit, scrapping an effort to buy devalued mortgage assets.

  "Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards,'' Paulson said today in a speech at the Treasury in Washington. "This is creating a heavy burden on the American people and reducing the number of jobs in our economy.''

Paulson's remarks are an acknowledgement that the centerpiece of the $700 billion bailout request to lawmakers was ill-conceived. Neel Kashkari, the Treasury official who heads the rescue program, told legislators last month that officials shifted to buying stakes in banks because it was a faster way to revive capital markets and the economy.

"I will never apologize for changing a strategy or an approach if the facts change,'' Paulson said.

Treasury and Federal Reserve officials are exploring a new "facility'' to bolster the market for securities backed by assets, Paulson said, adding later that the program would be "significant in size.'' Officials are considering using a portion of the bailout money to "encourage private investors to come back to this troubled market,'' he said.

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Offline Eupher

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #1 on: November 12, 2008, 12:54:55 PM »
I don't hear Barney (I'm a fudgepacker) Frank running his yap now.

I wonder why?  :???:
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Offline NHSparky

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #2 on: November 12, 2008, 01:36:45 PM »
I'm confused--does this mean they're bailing out people who ran up credit card debt?
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Offline Wretched Excess

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #3 on: November 12, 2008, 01:40:58 PM »
I'm confused--does this mean they're bailing out people who ran up credit card debt?

I believe that it means they are bailing out the creditors of people who ran up credit card debt.

Offline Chris_

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #4 on: November 12, 2008, 01:42:25 PM »
we saw this coming, and now it's here  we went from mortgages to car loans to credit cards. :thatsright:  now I'm sure that they didn't have this thing diagnosed before they threw money at it.

Hmmm, I wonder if there's still time to run up a few tens of thousands on a some credit cards so they can bail me out too.   :censored: liberals.  :banghead:
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Offline USA4ME

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #5 on: November 12, 2008, 02:06:13 PM »
Yeah, this credit card mess is going to be even bigger than the mortgage thing.

.
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Offline Eupher

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #6 on: November 12, 2008, 04:02:12 PM »
Somebody's got to pay for all those credit card offers that clog up your mailbox. I mean, just think of the paper used! And the stamps!  :-)

Seriously, a blind man could've seen this coming.

Paulson couldn't articulate precisely WHY the bailout was so freakin' important - just that it was. And that it had to happen NOW!

It took Bush a couple days to speak toward it and he's got an MBA and a battalion of financial advisors.

So now that they're disbursing bucks faster than a whore can undo her bra, it's time for "adjustments."

It's a good damn thing that the elections are over. If we had the election tomorrow, we wouldn't just elect Obama as Dear Leader - we'd bring in Kim Jung Il, Pol Pot, Uncle Adolf, and even Uncle Ho!

Can't be too careful - we need all the Marxist controls we can GET!  :cheersmate:
« Last Edit: November 12, 2008, 04:06:28 PM by Eupher »
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Offline Peter3_1

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #7 on: November 12, 2008, 05:22:40 PM »
And it is exactly the wrong way to soften the recession.  All it will do is what the FDR programs did, lengthen the pain.

Offline NHSparky

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #8 on: November 12, 2008, 05:28:31 PM »
Oh, that's cool.  So banks that extended credit to people who couldn't afford it get bailed out, but the people who, 1--can't afford it, 2--pay their bills on time, 3--all other taxpayers, get effed over for someone else's bad decision.

Got it.  I'm just gonna stop paying my bills now.  Jesus H. Tapdancin Christ.
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Offline AllosaursRus

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #9 on: November 13, 2008, 01:47:54 AM »
Oh, that's cool.  So banks that extended credit to people who couldn't afford it get bailed out, but the people who, 1--can't afford it, 2--pay their bills on time, 3--all other taxpayers, get effed over for someone else's bad decision.

Got it.  I'm just gonna stop paying my bills now.  Jesus H. Tapdancin Christ.

No shit! So since I pay my bills every month, usually twice a month on my credit cards, I won't qualify, but the lowlife down the street who's paying 29% interest and never made a payment on time in his life, will get help from ObamaWannaBeYa!

That's just ****in' great!!!!!!!

Boy is this a great country, or WHAT!?
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Offline formerlurker

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #10 on: November 13, 2008, 05:51:08 AM »
Neil Cavuto's opinion piece on Amex yesterday  was really good -- we have to pay our Amex bills every month in full, or we get a nasty letter from them and it affects our credit rating.   Here they are with their hands out to the same people they have no mercy for if we are late on a bill.   He pretty much told them to go f%^& themselves. 

I agree. 


Offline formerlurker

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #11 on: November 13, 2008, 05:57:29 AM »
Oh, that's cool.  So banks that extended credit to people who couldn't afford it get bailed out, but the people who, 1--can't afford it, 2--pay their bills on time, 3--all other taxpayers, get effed over for someone else's bad decision.

Got it.  I'm just gonna stop paying my bills now.  Jesus H. Tapdancin Christ.

3 months is the magic number on mortgages -- if you are three months behind in payments you will qualify for renegotiating your loans.   Bank of America and another bank are going to offer renegotiations to all of their customers to get them all financially healthy.   Some business pundit on Fox News yesterday urged everyone -- regardless of whether you pay your bills on time or not, to contact your mortgage company's loss mitigation departments (not customer service) to ask to renegotiate your loan if your home value has decreased 20-30%.   She said she was doing it, and screw it -- we will be paying for the bailout for decades to come, so get your piece of the pie.   

Why the hell not? 

Offline Ptarmigan

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Offline Wretched Excess

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Offline Ptarmigan

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #14 on: November 13, 2008, 04:19:20 PM »
I must have missed it.  I assume it was lost amongst 30 or 40 consecutive rabbit raving posts .. . .   :tongue: :-)

Bunnies caused the bank failures as well.
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Offline AllosaursRus

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #15 on: November 13, 2008, 04:24:56 PM »
Bunnies caused the bank failures as well.

LOL. Ya really got a one track mind goin' on there Pt.  :-) :-)
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Offline Vagabond

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #16 on: November 13, 2008, 10:05:26 PM »
Credit cards are a part of the capital system, so they did need to be bailed out.  If there had not been a sub-prime mortage problem, the banks would have been able to absorb the loss.  Such is unfortunately not the case.  The good news is that this is not likely to cause inflation in the short term.  The long term inflation can be mitigated by tightening the money supply as needed later.

The credit will necessarily be paid or we will not have access to it.

Russia has stiffed it's creditors and stolen their capital, this has not been widely reported.  They are now viewed as gangsters in the international finance community and will be lucky to draw major foreign investment in ten years.  Iceland has started down this path.  It is a really bad idea to bad mouth people you want to borrow money from.
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Offline rich_t

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #17 on: November 13, 2008, 10:07:44 PM »
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Credit cards are a part of the capital system, so they did need to be bailed out.

BULLSHIT!!!!
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Offline Vagabond

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #18 on: November 13, 2008, 10:41:11 PM »
BULLSHIT!!!!
A few weekends ago 20-25% of all applicant for car loans that had a credit score of 800 or better were turned down.  That is a bad thing.  Caterpillar recently looked for capital, even at an offer of 16%.  If a company with a good name in the first world can not access credit, what about a smaller ag outfit in an emerging economy?

The mortage problem created a $70B initial snowball.  At first it took out about one bank a month, then one a week, then several (worldwide) in a week.  That $70bn initial snowball turned into a $3.0T avalanche, this is a worlwide  problem.  If the bank goes under, one does not have access to credit.  That means that things that are necessary, like crops being planted, don't happen.

A lot of the banks that are still standing have balance sheet problems relating to unpaid credit cards, and if they don't get access to cash it will create another $70B snowball.   That's the reason to allow them access to the cash.

Mises, Hayek, and Keynes all agreed that you don't dare starve a smash, it can destroy you if you do.  There is no real danger of inflation currently, because right now the demand for cash is nearly infinite.  It isn't pretty but some government intervention is necessary in these situations and has been for more than 400 years now. 

Mises is often quoted among non-interventionists.  He was specifically critical of the government and federal reserve during the 1929 crash.  He cited, correctly, that the government did not pump enough dollars in to prop up the banks.  This is because of the gold reserve requirements of the time.  The federal reserve pumped in all the money it could under the laws of the time.  Fiat money has the advantage of being able to be generated or withdrawn in any amount necessary.

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Offline rich_t

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #19 on: November 13, 2008, 10:58:12 PM »
A few weekends ago 20-25% of all applicant for car loans that had a credit score of 800 or better were turned down.  That is a bad thing.  Caterpillar recently looked for capital, even at an offer of 16%.  If a company with a good name in the first world can not access credit, what about a smaller ag outfit in an emerging economy?

The mortage problem created a $70B initial snowball.  At first it took out about one bank a month, then one a week, then several (worldwide) in a week.  That $70bn initial snowball turned into a $3.0T avalanche, this is a worlwide  problem.  If the bank goes under, one does not have access to credit.  That means that things that are necessary, like crops being planted, don't happen.

A lot of the banks that are still standing have balance sheet problems relating to unpaid credit cards, and if they don't get access to cash it will create another $70B snowball.   That's the reason to allow them access to the cash.

Mises, Hayek, and Keynes all agreed that you don't dare starve a smash, it can destroy you if you do.  There is no real danger of inflation currently, because right now the demand for cash is nearly infinite.  It isn't pretty but some government intervention is necessary in these situations and has been for more than 400 years now. 

Mises is often quoted among non-interventionists.  He was specifically critical of the government and federal reserve during the 1929 crash.  He cited, correctly, that the government did not pump enough dollars in to prop up the banks.  This is because of the gold reserve requirements of the time.  The federal reserve pumped in all the money it could under the laws of the time.  Fiat money has the advantage of being able to be generated or withdrawn in any amount necessary.



You do not throw good money after bad.  These banks made piss poor management decisions about whom they would give credit to, and many consumers made piss poor credit decisions. 

Yet the millions of us that did not cause this problem are expected to pay for it?  Screw that!!  Were does it end.

I will tell you where...SOCIALISM and the destruction of capitalism.  These banks should fail, just as the Detroit auto industry should if they can not stay in business and be profitable with out my tax dollars bailing them out.

In my opinion, what we are now seen as a long overdue global market correction.  The only thing these bailouts are going to do is delay the inevitable and in the long run it will be worse.

I am not an economist.  But I know right from wrong, and you do not reward mistakes by paying those that made them.

I've also read numerous articles lately by economists that state the bailout was not necessary.  You won't see the mainstream media interviewing them...  I wonder why that is.

 


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Offline Vagabond

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #20 on: November 13, 2008, 11:24:08 PM »
You do not throw good money after bad.  These banks made piss poor management decisions about whom they would give credit to, and many consumers made piss poor credit decisions. 

Yet the millions of us that did not cause this problem are expected to pay for it?  Screw that!!  Were does it end.

I will tell you where...SOCIALISM and the destruction of capitalism.  These banks should fail, just as the Detroit auto industry should if they can not stay in business and be profitable with out my tax dollars bailing them out.

In my opinion, what we are now seen as a long overdue global market correction.  The only thing these bailouts are going to do is delay the inevitable and in the long run it will be worse.

I am not an economist.  But I know right from wrong, and you do not reward mistakes by paying those that made them.

I've also read numerous articles lately by economists that state the bailout was not necessary.  You won't see the mainstream media interviewing them...  I wonder why that is.

 



There are ways to have completed a re-capitalization without a bail-out.  But it would not have changed the fact that the credit markets needed re-capitalization, they had been bled just about white.  It really had become a question of when do we pay, and how much do we pay.  If we pay through the federal reserve, banking operations can continue.  If we pay with a direct loan from the Treasury, later the cost would be higher.  Finally, if the banks fail we would have to pay their creditors (you and me by the way) through FDIC, or if the money still isn't paid we get global armageddon, everything will only have the value it has right this moment, which is usually little indeed.

A Bagehot principle plan may have worked early on, but we didn't act quickly enough. 

The government has made loans to the banks lots of times in our country's history for this reason, this is right around the thirteenth stock, real estate, housing cycle we have gone through, it's nothing new. 

For reference, the first case of an investor/bank speculation bailout occured in the 1600's when the government of Britian stepped in and made loans to banks that lost investments in a bubble.  It is a normal part of capitalism, really.  Think about it, bankers in communist dicatatorships are demonized as enemies of the proletariat, the capital is siezed and the bankers are shot.

At the end, we (all of us) are the reckless borrowers,  I can't pay for my house tommorrow, most of us can't.  In other words I have leveraged the wealth I generate to purchase something I otherwise couldn't.  I have savings deposits in the bank that holds my mortage.  They use that credit to make loans, using leverage, to people like me to buy a house, most of us have a savings account at a bank of some sort, we are all the reckless lenders.
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Offline rich_t

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #21 on: November 13, 2008, 11:55:48 PM »
There are ways to have completed a re-capitalization without a bail-out.  But it would not have changed the fact that the credit markets needed re-capitalization, they had been bled just about white.  It really had become a question of when do we pay, and how much do we pay.  If we pay through the federal reserve, banking operations can continue.  If we pay with a direct loan from the Treasury, later the cost would be higher.  Finally, if the banks fail we would have to pay their creditors (you and me by the way) through FDIC, or if the money still isn't paid we get global armageddon, everything will only have the value it has right this moment, which is usually little indeed.

A Bagehot principle plan may have worked early on, but we didn't act quickly enough. 

The government has made loans to the banks lots of times in our country's history for this reason, this is right around the thirteenth stock, real estate, housing cycle we have gone through, it's nothing new. 

For reference, the first case of an investor/bank speculation bailout occured in the 1600's when the government of Britian stepped in and made loans to banks that lost investments in a bubble.  It is a normal part of capitalism, really.  Think about it, bankers in communist dicatatorships are demonized as enemies of the proletariat, the capital is siezed and the bankers are shot.

At the end, we (all of us) are the reckless borrowers,  I can't pay for my house tommorrow, most of us can't.  In other words I have leveraged the wealth I generate to purchase something I otherwise couldn't.  I have savings deposits in the bank that holds my mortage.  They use that credit to make loans, using leverage, to people like me to buy a house, most of us have a savings account at a bank of some sort, we are all the reckless lenders.

Make up your mind.  Are you talking about mortgages or credit cards?

Your first post on this thread was "Credit cards are a part of the capital system, so they did need to be bailed out. ", and that is what I responded to.

Now you seem to be moving into the mortage arena.  If you're going to keep changing the subject matter, this thread will soon become pointless.

And I iterate that the need to bail out the credit card companies is bullshit.

They are simply looking for another government handout just like GM is.

Bad financial judgment does have consequences, and those that have exercised bad financial judgment need to bear the penalty for that bad judgment. I find the attitude of those that have made very bad financial decisions, yet expect the millions of us that have not, to pay for their financial mistakes repugnant.

I will ask again: where does it end?
« Last Edit: November 14, 2008, 12:09:04 AM by rich_t »
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Offline Peter3_1

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #22 on: November 14, 2008, 11:53:24 AM »
Rich is correct. Remember too that the BANKS/Credit Card CO'S are borrowing at 1 1/2% to 3 1/2% $ and loaning at 15% TO 31% , there is an awful broad spread there for failure before the first dollar of loss. PLUS Banks can loan out about 7 times average daily deposits. So, conseveably, a  bank could earn between 100% and 217% per annum on the deposits, assuming no defaults.

If they are indeed, losing money, how innefficient are they? Does any system so innefficient with such low materials cost (the interest THEY pay out for the money they loan) measured against the income recieved need to be preserved as is? What about the banks NOT in trouble? Why are THEY being forced to pay for their inneficient competition's failings? That's just madness.

Propping up by government of busineseses that are out of control inefficient is a project doomed to failure. 

Offline Vagabond

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #23 on: November 14, 2008, 01:31:12 PM »
Make up your mind.  Are you talking about mortgages or credit cards?

Your first post on this thread was "Credit cards are a part of the capital system, so they did need to be bailed out. ", and that is what I responded to.

Now you seem to be moving into the mortage arena.  If you're going to keep changing the subject matter, this thread will soon become pointless.

And I iterate that the need to bail out the credit card companies is bullshit.

They are simply looking for another government handout just like GM is.

Bad financial judgment does have consequences, and those that have exercised bad financial judgment need to bear the penalty for that bad judgment. I find the attitude of those that have made very bad financial decisions, yet expect the millions of us that have not, to pay for their financial mistakes repugnant.

I will ask again: where does it end?

I made a mistake.  I should have said stock, real estate, credit, smash cycle, which would more accurately reflect the situation.   Also don't forget the responsibility of the government for making bad laws.  It certainly bears responsibility for that, and should make up for that bad interference.  The banks were cajoled to make bad loans, Clinton threatened government force, Bush pushed an ownership society.

It should end with the banks because of the necessary role they play in allotting capital.
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Offline Vagabond

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Re: Paulson Shifts Focus of Rescue to Consumer Lending (credit cards)
« Reply #24 on: November 14, 2008, 01:48:42 PM »
Rich is correct. Remember too that the BANKS/Credit Card CO'S are borrowing at 1 1/2% to 3 1/2% $ and loaning at 15% TO 31% , there is an awful broad spread there for failure before the first dollar of loss. PLUS Banks can loan out about 7 times average daily deposits. So, conseveably, a  bank could earn between 100% and 217% per annum on the deposits, assuming no defaults.

If they are indeed, losing money, how innefficient are they? Does any system so innefficient with such low materials cost (the interest THEY pay out for the money they loan) measured against the income recieved need to be preserved as is? What about the banks NOT in trouble? Why are THEY being forced to pay for their inneficient competition's failings? That's just madness.

Propping up by government of busineseses that are out of control inefficient is a project doomed to failure. 
The problem is that they weren't borrowing at 1.5% to 3.5% interest.  That is what the government was paying them if they purchased short term T-bills.  Banks had hit a point where the AAA banks could only get loans at greater than 40%, and others couldn't get a loan at all.  Historically that number is around 5% in a normal economy.  Credit cards are essentially unsecured loans, with a more substantial failure rate than mortages hence a higher rate due to risk involved.  Of course banks were getting threatened to make unrealistic loans in this market as well. 

Bank lending and borrowing practices are based on Monte Carlo Analysis.  They know a certain percentage of their loans will fail, and try to predict that amount and account for it.  If they're analysis says 3% of all credit cards will fail and fewer than that do, great they have better than expected profits.  At 4% the bank is hurting, with a lowered forecast.  At 5% their model falls apart and the bank likely falls into recievership, which means tighter credit at a minumum for others.  Remember the banks pays bills including interest on the secured loans we give them called savings accounts out of that gross profit.

If the banks can't make loans for whatever reason, then doing normal things become imposssible for other businesses.  Construction companies can't raise capital to buy material and labor, Farmers can't buy feed, seed,  and fertilizer, gas stations can't buy the next load of fuel, Vendors and retailers can't restock.  Capital is the worlds blood supply.  the banks funtion very much like a heart and lungs.
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