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.
Signs of Recession Since 'Before Christmas'?
Some economists argue we're already in one.
"I think we've been in one probably since before Christmas," said Charles Geisst, professor of finance at Manhattan College. "It takes a couple of quarters for it to work its way through the economy before there's any consensus as to whether we are in a recession, but if that's true then I think we are going to be in one for the better part of 2008, maybe extending into 2009."
The Federal Reserve isn't forecasting a recession yet, but plenty of other forecasters are, including former Fed chairman Alan Greenspan:
"The probabilities of recession have moved up," Greenspan told ABC News' George Stephanopoulos on "This Week."
How will we know for sure? That too is up for debate. "If there is a recession, we won't know when it started for a year or so after it's begun," said Lakshman Acuthan of the Economic Cycle Research Institute.
Many economists believe recession begins after two negative quarters of gross domestic product, plus rising unemployment and a slowdown in consumer spending. The latter two, we're already seeing.
"We've had a big party over the last five years, and the hangover is going to take a while to get through," said Paul Miller, managing director of FBR Capital Markets. And there are fresh signs the hangover is already here.
Stumbling Through an Economic 'Hangover'
Just today, Sears announced dismal fourth-quarter numbers after the holiday season. Shares of Sears' stock tumbled on Wall Street, down 5 percent.
But economists say it's more than just the extras, the shopping. It's the basics too.
After delinquent credit cards, they say watch for car loans next, even phone bills. AT&T is already reporting an uptick in delinquent payments.
And remember Field, who's trying to pare down costs? It wasn't his phone bill, but his cable bill. He's cut cable to keep up with his credit card bills.
His credit counselor, Howard Dvorkin, founder of Consolidated Credit Counseling Services, says Field is like thousands of other Americans trying to stay afloat during this credit crunch.
"It's been extremely difficult for people to get their credit paid down with all of these outward pressures, and prices going up," he said.
And the increasing pressure on the consumer is not helped by the continuing slip in home values.
"We haven't hit bottom yet," said Miller. "We're in a situation where home prices in this country are falling probably 10 percent over the next year. And in some regions, like California and Florida, you might see 25 percent home price declines. That's going to be painful to work through."
This means pain at both ends of the spectrum — for homeowners having a hard time keeping up with the payments after signing up for one of those risky, easy to get mortgages — and for the banks holding onto the crumbling loans.
"You could very easily see another $50 [billion] to $100 billion in losses in the U.S. banking system from these loans that are held on these banks' spreadsheets," said Miller.
Citigroup will reveal its troubled spreadsheet Tuesday.
"Nobody expects 2008 to be a recovery year," said Cecala. "If we're lucky, it will be a year when things bottom out and we can look for 2009 to recover, but I think people will just be happy to survive 2008."
A difficult forecast for the year ahead, and we're not even one month in.