Wednesday, November 5, 2008

What's Old is New Again: Credit Lenders Getting Risk Priced to Actual Market

No one stepped up to buy bonds to insure the USA clownsumer. These are the type of bond that would aspire to even junk status. In the wake of consumers already being at credit maximum, bankrupt or losing jobs, otherwise known as ability to pay back debt, the insurers are not covering these unsecured loans with cheap coverage and no one wants the bonds with these types of loans sitting underneath them. This was the first time it happened in 15 years!

Given that the lenders will have to assume the risk or pay a higher price for it again, you can imagine that they will begin to refuse lending or at least as loosely as they have been for the past decade and a half. Credit balances will be cut. New credit lines will be sitting in a non-approved bin. Clownsumers will be without the means to fund their ridiculous MTV lifestyle.

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