Consumer Credit Drops At Record Pace

(AP)  Consumer borrowing plunged in March at the fastest pace in 18 years as Americans put away their credit cards and hoarded cash amid the worst recession in decades.

The Federal Reserve said Thursday that consumer borrowing dropped 5.2 percent in March, the biggest decline since an 8.1 percent fall in December 1990.

In dollar terms, consumer borrowing plunged by $11.1 billion. That's the largest dollar amount on records dating to 1943, and more than three times the $3.5 billion drop that economists expected.

The borrowing category that includes credit cards dropped 6.8 percent in March after a 12.1 percent plunge in February. The category that includes auto loans fell 4.2 percent after rising by 1.2 percent in February.

The Commerce Department last week said that the personal savings rate edged up to 4.2 percent in March, marking the first time in a decade that the savings rate has been above 4 percent for three straight months.

Households have been spending less and saving more as they seek to replenish nest eggs in the face of massive job layoffs.

Consumer spending, which accounts for about 70 percent of total economic activity, fell 0.2 percent in March, ending an otherwise strong quarter. Consumer spending grew at an annualized rate of 2.2 percent in the first quarter, according to government data.

And while economists believe shoppers are still cautious, many retailers on Thursday reported April sales results that beat expectations. Wal-Mart Stores Inc., T.J. Maxx owner TJX Cos. Inc. and others reported bigger sales gains than expected, and mall-based clothing stores including Gap, American Eagle and Wet Seal reported smaller dips than analysts had forecast.

Still, the overall economy was contracting at an annual rate of 6.1 percent in the first three months of this year following a 6.3 percent fall in the final three months of last year. That marked the worst six-month performance in a half-century.

Economists are counting on President Barack Obama's $787 billion stimulus program with increased government spending and tax cuts for individuals and businesses to boost growth in coming months and get the country out of the recession.

Many analysts believe the economy is declining in the current quarter by around 3 percent, and could turn slightly positive in the third quarter.

The $11.1 billion drop in consumer borrowing in March left total consumer credit at $2.55 trillion. The Federal Reserve's measure of consumer credit does not include home mortgages or other loans secured by real estate.

[swin5]

Tell me why the people feel that the way to deal with hard times is to get out of debt and then the very same people go gah-gah over a president who figures the way to deal with hard times is to go further into debt. Go figure.

And by the way, if you're upset about the credit card companies, don't stop using your credit card. Use it more but then pay off the balance every month. Do you think the companies will like you for doing that?

[jbar116]

Personally I'm sure that not everyone is surviving without using credit which realy isn't helping them out in the long run but survival is important esepcially whein your living in a tent. I wonder how many personal bankruptcies will be caused by the credit industries GREED over the next year and if the Obama administration even cares. I would imagine that if we banded together and stopped using credit cards that our government and those GREEDY card issuers would get the message; the question is tho can we act as a people in unison? I say we make the attempt and stop using our credit until they start listening to us and make the changes to the industry that will finally and truly help the American people instead of these underhanded tactics that we must wade through to find an honest lender (which I can't seem to find).

[omega39-2009]

If I remeber correctly, which I do, Collen Powell endorsed Obama and he is the one I saw in front of the UN security council talking about all the WMD that Iraq had. Only to find none of them. maybe Powell made the whole thing up

I suggest you find a Newsweek article titled Where are Iraq?s WMDs?? dated June 2003. They go into Powell's role as well as the lies and whitewash. Here is an example...

At the CIA, Tenet seems to have latched on to the tubes as a kind
of smoking gun. He brought one of the tubes to a closed Senate hearing
that same month. But from the beginning, other intelligence experts in
the government had their doubts. After canvassing experts at the
nations nuclear labs, the Department of Energy concluded that the tubes
were the wrong specification to be used in a centrifuge, the equipment
used to enrich uranium. The State Departments INR concluded that the
tubes were meant to be used for a multiple-rocket-launching system. (And
Saddam was not secretly buying them; the purchase order was posted on
the Internet.) In two reports to Powell, INR concluded there was no
reliable evidence that Iraq had restarted a nuclear program at all.
These were not weaselly worded, said Thielmann. They were as
definitive as these things go. These dissents were duly recorded in a
classified intelligence estimate. But they were largely dropped from the
declassified version made available to the public. U.N. inspectors say
they have found solid proof that Iraq bought the tubes to build small
rockets, not nukes.

The real test of the governments case against Saddam came in the
testimony by Secretary of State Powell delivered to the United Nations
on Feb. 5. Powell, the administrations in-house moderate, was very wary
of being set up for a fall by the administration hawks. Presented with a
script by the White House national-security staff, Powell suspected
that the hawks had been cherry-picking, looking for any intel that
supported their position and ignoring anything to the contrary.

[tomrobla]

Citibank raised my credit card interest rate to 29%. I haven't charged anything new and rapidly paying down my debt.

[Azson]

The banks with their abuse with their fees and jacking up interest at a drop of the hat is what is to blame for this.
Consumers are tired of this crap.

[omega39-2009]

Remember that the next time you vote. Americans must take back our country from the incompetent loony-left d-crat socialists who are goose-stepping the country down their "Road to Hell."
Posted by StopTheLoonyLeft

Gee, should we put it back into the hands of the corporate theocracy now that their theories of trickle down and self policing markets have been proven as false as their WMD claims? Nah,
let me put this in language even a bushie can understand, we are going to stay the course.

[scottyusa]

Consumers are now doing what they should have been doing all along. Maybe the banking industry needs to downsize a bit. They have been feeding on the consumer credit teat for far too long. Pretty soon, to get people to spend, they will start charging you to keep money "safe" in a savings account. There is no end to how far these vultures will go.

[vuenbelvue]

It looks like Americans are not falling for the Major Wall Street Casino and Bank method of making money and feel great having cash in the local bank. They are seeing that after the Board of Directors, CEO's and loyal executive staff are gifted their bonuses in stock and cash the total left for shareholders is meager indeed. Then after the broker's fee and IRS payments, state and local taxes on any profit the amount earned is about the same as a certificate of deposit or 0% interest without the risk of a new scam to give the same people more of your money.

[gold_standard]

This is merely another solution to the credit crunch--stop mortgaging your soul to the banks.

Maybe Americans are getting smarter. Maybe they just have the poop scared out of them. Maybe we really are going broke as a nation.

[presjfk]

It couldn't be that the banks are pulling back their credit from consumers? Of course it is....