The Las Vegas Sun reports that residents of the Las Vegas metropolitan area have run up $3.88 billion – yes, that’s billion with a B – in credit card debt as of June 2014. The residents are not alone. There’s more credit card indebtedness piling up in Texas. The Dallas Morning Newslists the increases in credit card debt for Houston is up 5.45%, for Dallas-Fort Worth up 4.70%, and just for good measure there are other increases around the country. Orlando’s credit card debt is up 4.89%, Atlanta up 4.21%, Tampa-St. Petersburg up 3.75%. There’s good and bad news here.
Remember the mantra in this blog? One man’s debt is another man’s asset?
Somewhere, somehow, in the maw of the Wall Street financial institutions, those accounts receivable are being sliced, and diced, and traded. They are being securitized. They are becoming Asset Based Securities. Read bonds. They are being priced and sold. And, of course, someone is making a tidy profit. Synchrony, the largest issuer of private label credit cards for large retailers in the United States, recently earned a Morningstar rating of BBB for its new issue. Profits are good news, if the products being transferred are valued properly. If not, then we have the 2007-2008 Mortgage Meltdown Debacle Redux.
The replication of that debacle will be a bit more difficult if the Security and Exchange Commission succeeds in enforcing rules under the 2010 Dodd Frank Act. The rules now call for firms issuing the securities to file reports with the SEC on the underlying loan data, including credit scores and debt levels. The SEC plans on providing potential investors with debt to income ratio information and metrics which would help with the assessment of loan/credit quality. [WSJ]
We should possibly recall at this point that both the Heritage Foundation and the American Enterprise Institute have called for the repeal of most, if not all, the provisions of the Dodd Frank Act. The ultra-conservative think tanks have already declared the Act an imposition of unreasonable regulatory burdens on financial institutions. [AEI] It should also be remembered that Nevada Senator Dean Heller has called for the repeal of the Dodd Frank Act and its attendant regulations. [NVProg]
[Read the rest at Desert Beacon's blog]