Why the pandemic could lead to a US debt crisis too – The National

Why the pandemic could lead to a US debt crisis too – The National

As movement restrictions cause borrowers to fall behind on payments, potential losses are mounting

















The share of US car loans and credit cards in hardship stood at an estimated 7 per cent and 3.7 per cent in May, up about 18 and 180 times, respectively, from a year earlier. Getty Images







Concerns about the financial repercussions of the coronavirus crisis have largely faded since the first few hectic weeks. That's a problem, because authorities should be doing much more to prepare for what could be a destabilising wave of losses.



In the face of the pandemic, the US Federal Reserve has done an excellent job of keeping financial markets functioning. It has pledged trillions of dollars to ensure that a broad range of institutions - including hedge funds, money-market mutual funds and securities dealers - can meet their immediate obligations. This has helped consumers and companies to borrow the money they need to stay afloat.









More than $1 trillion in mortgage debt - including an estimated $361bn on the balance sheets of private lenders - is in forbearance programmes.





At some point, though, the question will be not