First, Capital One reported a default rate just under 10%. No surprise, for a lender in the thick of the subprime market. Then Bank of America reported a default rate over 10%. Not at all inconsistent with the fact that it bought Washington Mutual, Countrywide Credit, and Merrill Lynch. But then American Express was the next to join the "hit parade." This couldn't be right. Amex was a mainstream (de facto), even high end (officially) lender that chose its customers, supposedly in the style of JP Morgan. It wasn't living on the edge like the others, right?
Sorry folks, "la vida loca" is now "normal," at least in the credit space. That's because it was John and Jane Q Citizen who was living on the edge, not just Joe Deadbeat. The main difference was that John/Jane had a job when (s)he took out a loan, Joe perhaps did not. With the unemployment rate approaching 10%, and still rising, "had" was the operative word for many jobs. Small wonder that the default rate is just above the unemployment rate. After all, there are some people are employed (mostly in low paying jobs), that also can't make ends meet.
The reverse is mainly not true. There are few unemployed people (other than retired) who can make ends meet. The savings rate has been around zero for the better part of a decade. Synthetic "savings" in the form of home equity have disappeared. Most Americans have no savings and are living paycheck to paycheck. When the paychecks stop coming, so do the credit card payments.