Credit Today, Gone Tomorrow

WaPo had a story over the weekend on folks who are not so happy to see banks renege on home equity lines of credit.

In one brief phone call, Nancy Corazzi's lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago.

The lender informed her that her Howard County home had plummeted in value and the company did not want the risk that she would owe more than the house was worth.

"I got off the phone and I was shaking," said Corazzi, who was using the money to pay preschool tuition for her twins ."I was near tears. We needed this credit line to get us through some tough times."

We can debate the wisdom of holding onto a line of credit that puts a home at risk. But this is just another example of the fallout we're seeing from the turmoil in the credit markets. Today, WaPo reports that local governments are coming up with a hole in their budget because the Fed's recent cuts in interest rates, intended to stimulate the economy, have sharply reduced the income localities receive from investments. Meanwhile, the Examiner reports that Howard County officials are considering whether to set up a trust fund to tackle the looming burden of funding future retiree benefits.

Establishing a trust fund would provide officials more flexibility to invest the money and ensure it couldn’t be spent when budget times are tight.

Later, the paper quotes Christopher Summers, president of the conservative Maryland Public Policy Institute, who says jurisdictions should consider cutting or renegotiating the benefit programs rather than just putting more money aside.