Credit Crunch Hits Home

David Field, a 28-year-old credit counselor from Plantation, Fla., is engaged to be married in November. In the meantime, he's trying to get rid of his $9,000 in credit card debt. And while he's a third of the way there, like so many Americans, it hasn't been easy for him.

He's cut down nearly everything, even his driving as he tries to save money on gas.

"I mean you're trying get your minimum payments out. It's very difficult to keep up with prices rising everywhere," said Field.

The credit crunch is now hitting home, thanks in part to a domino effect that began with the big banks that are now reeling from the hundreds of thousands of mortgages that have defaulted.

They are the same mortgage loans that once seemed too good to be true. Now, homeowners and banks have learned … they were.

"I don't think anybody thought the market would tank as much as it has tanked," said Guy Cecala, publisher of the trade publication Income Mortgage Finance.

This week, economists say two more banks, Citigroup and Merrill Lynch, will likely report one of their worst quarters ever. And tonight, the Wall Street Journal is reporting Citigroup, a major financial services company, could write off Tuesday as much as $20 billion in bad loans — a staggering amount that means thousands of its workers could be laid off.

Big Buck Benefits for Financial Execs

While these companies continue to suffer financially, some have begun to press former and current executives as to why they aren't experiencing similar financial tribulations.

Today, Rep. Henry Waxman, D-Calif., the House Oversight and Government Reform chairman, has sent letters to Angelo Mozilo, CEO of Countrywide Financial, Charles Prince, former CEO of Citigroup and E. Stanley O'Neal, former CEO of Merrill Lynch, asking the top executives how they "stand to collect tens of millions of dollars in severance payments and other compensation," while their companies are forecasted to lose billions during the so-called subprime mortgage meltdown.

According to the Wall Street Journal, Mozilo's severance package is valued at more than $110 million. The Journal also reports that upon leaving Citigroup, Prince's benefits were valued at more than $29 million, mostly in company stock. And O'Neal departed Merrill Lynch, reportedly having accumulated more than $160 million in benefits. Waxman's panel is set to meet on Feb. 7.

Citigroup had no comment regarding the inquiries, and calls to the other two companies weren't immediately returned.

Despite the monetary gains for these executives, their companies continue to feel the sting.

"All of them are taking a body blow," said Cecala. "That's what's surprising here. You really don't see any bank that's doing well. People don't know when the next shoe is going to drop. Is it going to be credit cards? Student loans?"

For some, the "other shoe" has already dropped. Credit cards, also a major source of revenue for banks, have become a major concern.

Consumers are starting to fall behind. Capital One is reporting a rise in delinquencies. Even American Express, known for customers with solid credit, says it's experiencing a sudden rise in late payments.

The company reports it will take a $440 million hit because of it.

The headlines have been ominous, some that warn "Watch the Consumer" as this economy flirts with recession, because consumers make up 70 percent of economic activity in this country.

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