F. Scott Fitzgerald famously remarked to Ernest Hemingway, "The rich are different than you and me."
Hemingway bluntly replied, "Yes, they have more money."
That may have been true decades ago, but in these dark economic days, the rich are also beginning to suffer from the deepening credit crunch that has already devastated so many low- and middle-income borrowers.
Recent data show that an increasing number of upper-income consumers are late or delinquent with mortgage payments and credit card bills, according to a recent report in the Financial Times.
"The crisis is just starting to spread beyond the middle-class," Curtis Arnold, founder of CardRatings.com, told the U.K. daily.
"Even folks with good credit ratings scores are no longer immune from adverse actions from their card issuers."
Banks and financial services firms are justifiably worried about the eroding value of these previously well-performing holdings of the wealthier consumers.
Many senior managers see more losses looming on the horizon.
Oppenheimer analyst Meredith Whitney sees negative implications for overall U.S. spending over the next 12 to 18 months after American Express indicated credit deterioration among its most affluent customers. Both Amex and JPMorgan Chase have tightened up credit criteria for once blue-chip customers.
Second-quarter earnings for American Express declined 37 percent from the previous year as their wealthiest credit card users cut spending and borrowing, and had trouble making payments.
Nervous banks and credit card issuers already are making it tougher to borrow money or extend lines of credit. Consumer confidence and spending, already in the dumps, may slide even deeper if the trend continues.
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