| America’s credit crisis continues to sour. On | | | | borrowers expected to default on their loans is |
| February 5, 2008, the stock market had its worst | | | | expected to rise. Banks are largely suffering due to |
| decline in nearly a year. Driven down by shrinkage in | | | | big bucks loans that aren’t being paid back. |
| service industries, the S&P 500 stock market index | | | | Investors are feeling the pain. On January 30 th the |
| dropped by 3.2%. Economists predict that in the next | | | | S&P threatened to downgrade over 8,000 bonds and |
| year, American banks will suffer great losses, with | | | | CDOs, because financial institution’s losses are |
| direct consequences to you, the customer. Be on the | | | | posed to double in the next year to an immense |
| watch for how the nationwide credit crisis affects | | | | $265 billion. |
| you and your assets. | | | | Although it is unlikely your bank will claim bankruptsy, |
| If you are applying for a loan, educate yourself first | | | | other consequences are mounting. 70% of loan |
| about the stability of the bank, prior to committing | | | | officers expect the quality of their credit card and |
| yourself. In these dangerous economic times, you | | | | other consumer-loan portfolios to become more |
| need to be sure your money is safe and that you | | | | troubled in the next year, according to the Federal |
| are getting a competitive interest rate. Ask your | | | | Reserve’s survey. Wachovia, a substantial |
| bank frank questions about how they plan to survive | | | | North Carolina based bank, fell to $51 million from $2.3 |
| in the long term. Also ask how they determine risk | | | | billion, mostly because of losses on residential |
| decisioning and what they use for loan origination | | | | property and car loans. |
| solutions. | | | | With the real estate market flailing, regional and local |
| Educate yourself about the stock market and the | | | | banks alike are more hesitant than ever to give out |
| current economic pickle in which America finds | | | | “construction loans.” If you were hoping |
| herself. Banks are stingier than ever about giving out | | | | to build your home and obtain a loan for it, be aware |
| loans, and it is in your best interest to know why, | | | | of rising interest loans and setbacks. Listen to what |
| instead of assuming your loan request was denied | | | | the experts are saying: At the end of January 2008, |
| because of that coffee stain on your tie. | | | | John Dugan, the Controller of Currency, stated that |
| On February 4 th the Federal Reserve published its | | | | one-third of community banks currently have |
| most recent quarterly survey of bank-lending | | | | commercial-property loans that are over three times |
| officers, proving that credit troubles are increasing. | | | | their capitol. Ouch. He also predicted an increase in |
| The Federal Reserve stated that many banks have | | | | bank failures and loan-loss reserves. |
| tightened the belt on lenders, with harsher lending | | | | Financial regulators and bankers should combine |
| standards and higher rates on loans. | | | | forces to find a solution for these doomsday |
| Do economists foresee that capital markets will head | | | | predictions. In the meantime, keep these facts in |
| to sunnier times in 2008? Not so much. With the | | | | mind when you are applying for your next bank loan, |
| recession over our heads, the percentage of | | | | and know that risk decisioning is tougher than ever. |