Just like the illiquidity of CMOs is drying up non-conforming mortgage availability, illiquidity of CDOs will dry up credit card business by non-depository institutions. I am not sure if the CDO market is as stuck up right now as the CMO market. I think the consumers are not (yet) defaulting on their CC debt as much as on mortgages – may be they are thinking that foreclosure is a slow process compared to not being able to buy groceries. Also, I don’t think there is this huge exploding debt scenario like ARM resets. That should keep CC debt a bit more manageable.
FormerSD: Yes, at least some CC debt gets recycled via CDOs. Otherwise, non-depository institutions can’t issue consumer debt.
