In other encouraging financial news

If you were searching for another reason to start stockpiling batteries, canned food and shotgun ammunition, look no further than the latest piece from BusinessWeek's Jessica Silver-Greenberg. While that pesky subprime mortgage thing has supposedly been addressed, there's still the small matter of $950 billion (yes, billion) in outstanding credit-card debt...

The consumer debt bomb is already beginning to spray shrapnel throughout the financial markets, further weakening the U.S. economy. "The next meltdown will be in credit cards," says Gregory Larkin, senior analyst at research firm Innovest Strategic Value Advisors. Adds William Black, senior vice-president of Moody's Investors Service's structured finance team: "We still haven't hit the post-recessionary peaks [in credit-card losses], so things will get worse before they get better." What's more, the U.S. Treasury Dept.'s $700 billion mortgage bailout won't be a lifeline for credit-card issuers.

Can it really be that bad, though, in light of everything the economy continues to just barely kind of maybe weather?

After all, not all credit-card debt is bad or, to use the press' favorite new financially-focused adjective, "toxic" debt. Maybe the banks won't dial up interest rates on these debts, thus making it easier for consumers to rein in spending and make the payments.

But some banks and credit-card companies may be exacerbating their problems. To boost profits and get ahead of coming regulation, they're hiking interest rates. But that's making it harder for consumers to keep up. That'll only make tomorrow's pain worse. Innovest estimates that credit-card issuers will take a $41 billion hit from rotten debt this year and a $96 billion blow in 2009.

Or not. Well, at least financial institutions don't bundle consumer credit debt into over-valued securities that are sold to investors like all of those bad mortgages, right?

Those losses, in turn, will wend their way through the $365 billion market for securities backed by credit-card debt. As with mortgages, banks bundle groups of so-called credit-card receivables, essentially consumers' outstanding balances, and sell them to big investors such as hedge funds and pension funds. Big issuers offload roughly 70% of their credit-card debt.

Shit... But, and I hesitate to ask, isn't the risk threshold for credit-card lending structured differently than that of mortgages?

Making matters worse, the subprime threat is also greater in credit-card land. Risky borrowers with low credit scores account for roughly 30% of outstanding credit-card debt, compared with 11% of mortgage debt.

Ok, we are done talking now. Like any good journalist, your penchant for truth-telling is frightening people.