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Banks May Pull Back $2 Trillion in Credit Lines

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I wonder what the consequences of this will be:

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.”

In my darker moments, I worry that our economy is a house of cards built with easy credit. If that credit collapses, so does our prosperity. After recent excesses, American’s could certainly use more wisdom when it comes to buying goods on credit — I just hope it doesn’t take a long, deep recession for us to attain that wisdom. We’ll see.