Consumer Finance during the Recession

By: Corey Mutterperl

During this recession, consumer finance has come under a lot of scrutiny. One area of concern is people’s use of credit cards. Is it possible for consumers to live by only spending cash and not using their credit cards? It seems that many consumers are voluntarily putting themselves on a credit card using freeze and just using a debit card as a form of cash only spending. Some are actually having their credit lines reduced by the banks and the credit card companies. It has been shown that people tend to spend less when they do not have a credit card available, and are not financing a lifestyle that is more than they can afford.
Many consumers are also having great difficulty maintaining the mortgages on their homes. They are going to their banks for mortgage modifications or refinancing only to find the banks unwilling to help them. The banks need to open up the credit markets in order to keep people in their homes. President Obama’s administration is telling banks that if they want bailout money, they must lend it out. Instead many banks are using the bailout money for acquisitions and to help their own bottom line. Many economists however, feel that banks must get healthy again for the economy to turn around. They also feel that banks cannot be reckless again in making loans to people who can’t afford to pay them back.

References:
http://online.wsj.com/article/SB123284394918313137.html

http://money.cnn.com/galleries/2009/real_estate/0901/gallery.tough_workouts/index.html

http://money.cnn.com/2009/01/21/markets/thebuzz/index.htm