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National Report -- 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, a prominent banking analyst told Reuters. After jobs, the credit card is considered the second key source of consumer liquidity, said Oppenheimer & Co analyst Meredith Whitney.
"In other words, we expect available consumer liquidity in the form or credit-card lines to decline by 45 percent," she said.
Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co. have each discussed reducing card exposure or slowing growth, according to the analyst. Those three firms represent more than half of the estimated amount of money outstanding on credit cards as of September 30, she said. A pull-back by these three poses a risk to overall consumer liquidity that would severely hurt spending, according to the report.
In a note that Whitney wrote, dated November 30, she also said credit lines to consumers through home equity and credit cards had been cut back from the second-quarter levels.
"Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view," the analyst said.