Brian A. Davis

'Panics Do Not Destroy Capital'

Dear Readers,

Panics to not destroy capital. Panics simply put a lender on notice as to how many bad loans they have already made. For instance, in California when thousands and thousands of (bad) loans were made to high risk borrowers, that was the point where capital was lost. Now that the financial market is approaching the "Panic" stage (and things will get worse before they get better) lending institutions are simply realizing now how much capital that has been put into "unproductive works."

While some readers will contend that it is a good business to see their fellow American in a debt ridden situation, and finally relying on credit cards for necessities, it is a perilous position for the companies and borrowers who are involved in this practice.

Finally, I firmly believe credit card issuers (and any other loan originators for that matter) and their clients have a business relationship. However, should the clients fall upon hard times (see the state of the U.S. Economy) credit card underwriters are in an extremely unenviable position.

Respectfully,
Brian A. Davis