In July, a survey of senior loan officers by the Federal Reserve Board found that during the preceding three months, 65% of U.S. banks had tightened their credit-card lending standards by raising required credit scores or lowering existing credit limits. That was up from the April survey, in which 30% of banks reported tightening their standards.
As a business we rely on credit cards for most of our cost of goods purchases, with about $20,000 a month cycling through several cards, some business and some personal. For the most part we (me and the business) pay off cards in full every month, with some cards used as lines of credit and short term loans.
What will this mean for the game trade? If credit cards are tightened up significantly, many small manufacturers will probably be stopped in their tracks. Distributors will probably be fine, except that many retailers use credit cards to pay them. This might gum up their works as well. Retailers like myself can probably survive on less credit, but we'll likely have a transition period of cash flow problems in which new product is passed in favor of increased liquidity. Consumers at the end of that chain will likely see a similar transition. Reduced credit is only part of it, as the banks are likely to raise rates and make the use of credit more expensive.
While the government pondered the financial bailout over the weekend, they had no problem sneaking in a giant $25 billion loan package for the big three auto makers. These companies deserved to fail, unlike the millions of small businesses that will likely suffer now. The big three have spent their R&D on SUV's and high performance cars while their competitors rightly focused on economy cars and efficient technology. It's an election year and both candidates have promised them cash for their foolishness, so here we are again.
And finally the credit card holders bill of rights was passed by the house over the weekend. The president promises to veto it.