The course of consolidation
AS THE YEAR draws to a close to bite so the nightmare caused by the sub-prime crisis gets ever more scary. The post-summer rally following the Federal Reserve’s rate cuts is now a distant memory as the credit/liquidity crisis takes on yet more twists and turns. Banks have revealed more losses – largely a consequence of the rating agencies announcing fresh downgrades of asset-backed bonds and ABS CDOs, and from further deterioration in the market value of those securities. The level of dislocation means that sub-prime is more than just a bad dream; fears for the health of the biggest financial institutions are growing and the odds of a US recession are rising fast. Yet an amazing disconnect has emerged between mortgages and the other structured finance stalwart asset class of US consumer credit – credit cards.
On the one side sits sub-prime...
