Chronicles Of Depression 2.0: #448: Your Plastic 3

Meredith Whitney was the first person -- within Wall Street -- to express skepticism about CitiGroup.

Now she's worried about consumer credit.

America must keep consumer liquidity flowing

First, I am more bearish today than I have been in the past 18 months. In so far as the market has impacted on the economy, capital destruction has been so intense that multi-trillions in capital raised by institutions through both private and public capital has gone to plug holes and not stabilise the effects of shrinking liquidity to corporations and consumers. More than $3,000bn (€2,365bn, £1,955bn) of available credit has been expunged from the markets and therefore corporate and consumer borrowers so far this year.

Emphasis added by me.

If you can't parse it, $3,000B = $3 trillion.

Here's the consumer credit bit:

Fourth, amend the proposal on Unfair and Deceptive Lending Practices that is set to be adopted in 2010. The proposal includes one major change that will lead to a severe unintended consequence – pulling credit from consumers. Restricting lenders’ ability to reprice an unsecured loan will cause them to stop lending or to lend less. This change could cut over $2,000bn in unused credit card lines, or over 40 per cent of unused credit lines. With so many Americans relying on their credit cards as a major source of liquidity, it would be equivalent to a major pay cut.

Emphasis added by me.

If that's still too opaque, there's a clearer and shorter article here:

Credit card industry may cut $2 trillion of lines: analyst

(Reuters) – The U.S. credit card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

"In other words, we expect available consumer liquidity in the form or credit-card lines to decline by 45 percent."

Emphasis added by me.

What is not being discussed: What about all those pre-pay "credit cards" with their criminal fees? Will they disappear too? I haven't seen any articles written about them.

Previously here:

Chronicles Of Depression 2.0: #281: Your Card 2
Chronicles Of Depression 2.0: #273: Your Card
Chronicles Of Depression 2.0: #247: Plastic