Wealthy Struggle in US Credit Crisis
With news announced that American house prices have plunged by up to 15% in the subprime crisis, it has been revealed that America's wealthy are beginning to feel the pinch, struggling with their mortgages and credit card bills, with lenders tightening their lending practices.
Banks such as JPMorgan Chase and credit card groups such as American Express have clamped down on lending to customers that have traditionally been regarded among the safest and most profitable borrowers.
“The crisis is just starting to spread beyond the middle class,” said Curtis Arnold, founder of CardRatings.com. “Even folks with good credit-ratings scores are no longer immune from adverse actions from their card issuers.”
Senior bankers say that after the subprime debacle, the worsening outlook of “prime” portfolios shows the crisis is far from over and could inflict substantial losses on financial institutions.
The spreading of the credit crunch to wealthier consumers could hit financial groups, such as JPMorgan and American Express, which have so far avoided the worst of the crisis because of their relatively low exposure to subprime customers. Second-quarter results from financial companies showed rising losses on mortgages and credit cards issued to prime customers as soaring gas prices, the slowing economy and depressed house values took their toll.
Jamie Dimon, JPMorgan’s chairman and chief executive, recently told Wall Street analysts that the outlook for prime mortgages was “terrible” and the rate of delinquencies could double or treble from current levels of about 4 per cent. FINANCIAL TIMES[/q]