The Second Shoe Poised to Drop

American Express had its credit rating lowered by Moody's this morning. Credit card debt has been securitized and sold much like mortgages. For years any one could get a credit card and rack up debt. Before my son could read he received solicitations in the mail to apply for a credit card. If I had a dog I could have gotten him a credit card.

I recently read that people stopped paying their mortgages before they stopped paying their credit card bills because the credit card minimum payment was less. Now people are starting to default on their credit card debt and when that happens the credit card backed securities will go under.

This market is much smaller than the mortgage back securities market but given all the uncertainty in the market and the uncertainty of what exactly is on all the banks' balance sheets, this does not help.