Tag Archives: debt

Thoughts on the Bailout and Credit Cards

Unsurprisingly enough, credit card defaults are on the rise. This industry is marked by less oversight and more shadiness than the mortgage industry, which is saying something. Now American Express is asking for a government handout, since AMEX depends on banks’ buying securities backed by credit card debt in order to make money. Banks, of course, are trying not to choke on the credit cards debts they already have without incurring more, which leaves AMEX begging Uncle Sam for money.

But let’s see here: if Uncle Sam helps out AMEX, it allows AMEX to float more credit card debt. Is this what our economy needs? Maybe credit card debt should dry up a little bit, especially since Americans abuse cards so badly. Sure, an illiquid credit securities market may make it harder for some Americans to refinance or consolidate some credit cards, but that is still no substitute for paying the bloody cards off and not incurring more debt, and ready access to new credits cards will probably just make it easier to avoid making the hard decisions.

In short, having the federal government go with more deficit spending so that Americans can get into more credit card debt sounds like a perfect recipe for destabilizing our currency and economy even more. No doubt it will be wildly popular on Capitol Hill for that reason.