Capital One Financial of McLean posted its first quarterly loss ever, from the expense of shutting down its mortgage lender, and warned of additional challenges in the credit card and auto finance businesses.
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The results included $898 million in costs associated with the closing of GreenPoint Mortgage, which was announced in August as credit-market turmoil began to inflict widespread damage on financial institutions and the mortgage industry. Yesterday’s announcement offered a glimpse into how the credit crunch might affect other areas of lending.
Capital One reported an increasing number of delinquencies and defaults in both the credit card and auto finance sectors. As a result, the company said its expenses associated with covering bad loans have increased.
It appears that the party is coming to an end, and problems with credit aren’t limited to the mortgage industry as many experts had claimed just a few months ago. The credit-fueled American life of luxury is not sustainable for most people living it.
“Consumers for a while were using their housing as ATM machines,” he said. Now they have increasingly turned to credit cards as a source of money, he said. Consumers already have considerable debt and may not have room to borrow more.
Now that the housing ATM has been nearly tapped dry, consumers are going back to the plastic. Economists who predict the US economy is strong because of continued consumer spending are absolutely correct, as long as there’s some way for consumers to borrow money.
Just keep drinking the Kool-Aid and pay no attention to any negative news you might hear; everything will be fine.
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