SOUTH DAKOTA STRAIGHT TALK

The Associated Press has done an analysis of financial data from the country’s largest credit card banks and reports that credit card delinquencies have increased.

Significant losses by the Credit Card Banks could impact the Sioux Empire’s economy and South Dakota Government revenues.

It is interesting that the in the story of their analysis of the credit card bank’s portfolios that the narrative tries to connect a cause (sub prime failures) to thus effect credit card delinquencies. The financial health of our banks and having available credit is critically important to our economy.

South Dakotans should be concerned what these delinquencies mean to the South Dakota credit card industry. Many of the largest banks have taken massive write downs of their portfolios due to losses in subprime mortgages. In some cases there have been employee layoffs as the institutions have restructured their business. On Thursday Citigroup reported it might write off as much $18.7 Billion in debt obligations (that is with a B) and cut its common stock dividend by 40%.

The Associated Press names HSBC but there is no mention of Citi, Wells Fargo, First Premier or others in South Dakota. Hopefully the banks will increase their emphasis on their consumer credit business that at this point is a profit center for them and will not be cutting jobs in the credit card sector that is important to the South Dakota economy.

Sidebar – The Bankruptcy Reform legislation of a couple of years ago does not allow discharge of credit card debt for middle income wage earners; though Bankruptcy does provide forgiveness for mortgage loans though the homeowner still would have lost their equity and home through the foreclosure process.

The health of our Credit Card industry is an issue that could hit close to home and one our business and government leaders should pay close attention to.