Signup for our free newsletter:

Main Street is Getting Nervous

Written By Brian Hicks

Posted November 13, 2007



While a good bit of the news lately surrounding the credit crunch has revolved around those faltering CDOs, the real affects of the sub prime mess actually continue long after those massive write-downs hit the Street.

That’s because while the credit crunch has claimed big wheels like Stan O’Neal and Chuck Prince, their foolishness eventually finds its way onto Main Street.

You-know-what after all tends to flow downhill.

The net result, of course, is that the days of ridiculously easy credit are rapidly coming to an end too-and debt desperate Americans have begun to notice.

That’s the story at least according to a report released today by GDEXAuto that shows Americans shopping for credit are beginning to get a little nervous about their access to the money spigots.

According to the release:

"In response to the question – "Given the fallout in the sub prime mortgage market, how concerned are you that your ability to obtain credit for something like a car loan will be affected?" – a significant portion of the population expressed fears about possible spillover from the sub prime crisis.

Fully one-third of the sample (33 percent) said they were "extremely" or "somewhat" concerned their credit may be at risk."

Among the survey’s key findings:

· Youths Feel at Risk. Concern increases with younger respondents; fully 45 percent of 18-24 year-olds are concerned, along with 43 percent in the 25-34 group, compared to only 15 percent in the 65+ age bracket – individuals who are less likely to be seeking credit for a car or other big-ticket item.

· Concern Matches Credit Need. By income, the greatest concern (43 percent) lies in within the $25K-$50K segment – people with enough income to have an interest in a car loan, but not so much that they don’t need the loan.

· Kids Raise the Stakes. Likewise, respondents with children in the household – individuals who are more likely to be in the market for a car loan – expressed greater concern (44 percent) than respondents in households without kids (27 percent).

· Credit Impact Already Felt. For some of those in the lowest income bracket, this isn’t a theoretical question; 12 percent say their credit has already been affected.

· Marked Racial Divide. The racial disparity is even more pronounced – 52 percent of nonwhites expressed concern, versus 30 percent of whites. Likewise, 9 percent of nonwhites say their credit has already been affected.

So while CNBC and others are content to keep talking about what further write offs in the financials might mean to the Street in the future, a much bigger story is beginning to emerge on Main Street these days.

Because if there is one thing the American consumer can’t possibly live without these days-its credit.

It’s sad but true. 

By the Way: I came across this story yesterday about  cancellation problems at Echostar Communications (Nasdaq:DISH ), the second largest satellite television operator in the U.S. It seems as though the sub prime slide has found its way to their doors too.

Shares of the company plunged 16% yesterday, when the company revealed that a sluggish economy–particularly in housing—had boosted its cancellation rate. In fact,  said Echostar CEO Charlie Ergen, "If you go down some subdivisions in America today, every other house has a for sale sign, and that particular house may have a dish or cable running into the house and there is nobody living there."

 Just another canary for the coal mine.