Credit Card Bond Sales at Zero, First Time Since 1993 (Update1) By Sarah Mulholland --
http://www.bloomberg.com/apps/news?pid=20601109&sid=awS5vZQvmwd4&refer=homeNov. 5 (Bloomberg) -- Credit card companies were shut out of the market for bonds backed by customer payments in October for the first time in more than 15 years, as investors shunned the debt amid the global credit freeze.
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Credit card issuers are not able to securitize credit card receivables and sell them on to investors. That means that they have to keep them on their books, and that in turn means that the banks have to raise capital to maintain their asset ratios and reserve against the steadily worsening losses on uncollectable credit card balances.
So when a Citibank gets $25 billion from the government, it doesn't necessarily increase or even maintain their ability to lend more than they have in the past.
As bonds backed by credit card receivables mature, and can't be replaced, the banks will have to reduce credit card receivables.
The same thing is happening with auto loans and student loans. The loan originators can't sell them on, and they can't keep them all on their own books while maintaining their capital ratios.