Looming credit card debt may trigger next crisis

By siliconindia   |   Wednesday, 19 November 2008, 16:37 IST
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New York: American society is likely to witness another financial crisis because of looming credit card debt. "A credit card crisis is waiting in the wings," says John Whitehead, former chairman of Goldman Sachs Group and former U.S. Deputy Secretary of State under President Ronald Reagan. However, executives at the Reuters Global Finance Summit did not dare to make any predictions due to a dire mix of bruised markets, strained governments, and a worried public. "You have to believe that we have frightened the American consumer pretty deeply here," said Ed Clark, chief executive of Toronto-Dominion Bank, North America's seventh largest bank. "It is hard not to believe that they are not going to go on strike for a period of time," he told the Reuters Summit. "And it is hard to see the positive element that is going to save us from having a deep recession," executives told the Reuters Summit the mortgage-driven crisis infecting markets will likely be followed by even bigger problems borne out of growing credit card debt. Banks are already reporting losses in both credit cards and home equity loans. A credit card collapse would further squeeze the financial sector. Americans had accumulated $971.4 billion in revolving consumer debt at the end of September, up 3.4 percent from the end of 2007, according to the U.S. Federal Reserve. "Unlike collapses of the past, where the finance industry just brushed it off, kept going, they are right there at the vortex of the storm," Joseph Perella, CEO of boutique merger advisory firm Perella Weinberg Partners said.