Brian A. Davis

Winners and Losers from the Mortgage Mess

For many consumers, the credit card is the last line of defense before the street. And there is plenty of anecdotal and hard evidence. This situation can also be a catch 22 for credit cards. This article appeared to over-look a few other issues.

Assuming that is the case, it seems the expectations of a boom or bust for credit card companies is in the works. Remember, credit card debt is not secured. Should a party fail to pay, go bankrupt, lose their house, etc. the credit card company will be left holding the bag.

Depending on inflation, it should also be noted that if... if credit card and other revolving debt is serviced, there is also a risk of being repaid in inflated dollars.

Last, Congress plans on addressing credit card issuers and other forms of loan sharking in the fall. At the end of the day, when re-election is near, it is easy to vilify credit card companies.

P.S. MBNA was sold for several reasons including the death of Al Learner President and Founder of the company... It would also appear that MBNA was sold when the getting was good... consider the performance of financials since MBNA was sold... at its premium price. Last, MBNA was not selective as to who was issued a card... BAC has not fostered the growth of that company, and does not understand the family values that Al Learner used to create the empire. The MBNA division of BAC is a mere shadow of what used to be. At the end of the day, more will shake out of credit card companies. This could very well be the next financial shoe to drop on Wall Street.

Financial-Dip Buyers Forget To Ask What's Next

All of these banks in general, and mortgage exposed in particular (like BAC) are praying that the House and the Senate can stamp out a bill that will make the Federal government responsible for their trashy loans... Sounds more like the "moral hazzard" that was sounded off time and time again last week. Remember House members up up for re-election every other year... Who wants to be the guy who increases the national debt...bails out the big corporations...and weakens the dollar?

Soon the euphoria will be over and the financials will not be allowed to celebrate "lower than expected losses"... and be treated like winners...

Let's not forget that credit cards are teh next shoe to drop...and BAC has the highest exposure in that area!!!

Big Ben's Credit Card Moves: The Good, the Bad and the Ugly

Dear Readers,

Continued growth of MA and V will be predicated on consumer demand.

MA and V, have excellent business models. Both companies have healthy stock prices as well. MA and V are based on consumer credit transactions (which should see weakness in coming months).

1. Over-spending
2. Inability to service debt
3. Default rates
4. Tighter underwriting standards

The ability for consumers to service debt will be tested. While this becomes more or less an issue for the underwriting banks, it will also effect the bottom line of MA and V. Furthermore, once a MA or V user defaults, then that customer is unable to continue transactions. Last, banks will continue to scrutinize customers with tighter underwriting standards. There will be come customers that banks will not want. These issues will effect the bottom line of MA and V.

Respectfully,
Brian A. Davis

P.S. I do not hold positions on MA and V at the time of this article.