If you tuned in to any news source yesterday, you heard about the Dow's 387 drop. Well, it dropped another 133 points this morning, according to Associated Press. Stock markets all over the world are taking similar turns.
The culprit for the plunge? U.S. consumer credit problems.
The largest U.S. mortgage lender, CountryWide Financial, is experiencing higher-than-normal delinquency rates with subprime and prime borrowers and expects results to be effected because of it. MSN reports more than 20 subprime lenders have shut down as a result of increased delinquencies and mortgage defaults. The surmounting problems in the mortgage industry led to a French bank's halt in investing in U.S. subprime mortgages, which, in turn, led to the Dow's drop.
Elizabeth Weintraub, Guide to Home Buying/Selling, talks about why the subprime market is crashing. She lists lending to consumers with low FICO scores as one of the reasons.
Foreclosure rates continue to increase, yet, interestingly, so does consumer credit. According to the Federal Reserve, consumer debt hit a record $2.459 trillion in June.
So who's to blame? Consumers for continuing to rack up debt after taking on mortgages and even after facing foreclosure? Subprime lenders for knowingly lending to financially unprepared consumers? The Feds for pumping billions into the banking system without fixing the real problems? Or all of the above?
What's your take on how credit problems are affecting the nation's - and the world's - stock market?
From LaToya Irby,
Your Guide to Credit / Debt Management.
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