Here's something you might be interested in.
New York's Citigroup this evening (Oct. 31) reported a $1.4 billion third quarter loss as a result of securitizing of credit cards. For more than a year, savvy observers have known that this time bomb would go off throughout the banking sector. Financial institutions bundle cash flow streams, such as mortgages, into securities that are peddled to their customers. The securitization of subprime mortgages has been the disaster du jour for a year now. (Securitization of prime mortgages is a problem, too.) For a long time, Wall Street has been securitizing income streams from credit cards, too. Now consumer spending is stumbling badly. It plunged more than 3 percent in the third quarter. These credit card income streams will dry up -- just what happened with mortgages.
New York's Citigroup this evening (Oct. 31) reported a $1.4 billion third quarter loss as a result of securitizing of credit cards. For more than a year, savvy observers have known that this time bomb would go off throughout the banking sector. Financial institutions bundle cash flow streams, such as mortgages, into securities that are peddled to their customers. The securitization of subprime mortgages has been the disaster du jour for a year now. (Securitization of prime mortgages is a problem, too.) For a long time, Wall Street has been securitizing income streams from credit cards, too. Now consumer spending is stumbling badly. It plunged more than 3 percent in the third quarter. These credit card income streams will dry up -- just what happened with mortgages.