Published On: January 26, 2009

U.S Credit Freeze Hurting The Home Theater Business Badly

Published On: January 26, 2009
Last Updated on: October 31, 2020
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U.S Credit Freeze Hurting The Home Theater Business Badly

You have to wonder what the point of credit is when even people who have plenty of money and have never failed to pay a bill in their lives can't borrow money from the banks. This situation is having a devastating effect on the home theater industry.

U.S Credit Freeze Hurting The Home Theater Business Badly


You know you got trouble in the world economy when the most wealthy people with the absolute best credit are getting cut off from access to credit and its effects do in fact trickle down to every element of the economy, including the world of specialty audio-video, high-end audio and high performance home theater.

One Southern California AV custom installer, who just landed one of the largest custom installation projects ever heard of worldwide, recently called to say that American Express cut the limit on his "Black Card" (aka the Centurion Card) by 60 percent. While most Americans say "boo hoo" to this maneuver - this dealer uses this high-limit card to order millions of dollars in equipment, travel and other services. He now needs to think differently about his business expenses because of the credit limitations imposed on him by an ailing Amex. Note: in order to be in good standing with Amex you need to pay your bill every month, which this dealer does faithfully.

In the past two weeks readers, dealers and advertisers have been reporting that banks nationwide are abruptly freezing their home equity loans, thus leaving no room to borrow any money even when there is more than a million dollars remaining in equity. Same thing goes for readers with FICO scores of over 800. If these customers can't get credit then who can? And if they can't get credit, then the only people in the market who can buy luxury goods such as 65 inch plasma HDTVs and $10,000 AV preamps are people with cash and that limits the market severely.

Bloomberg is reporting today that Bank of America and Citibank are potentially going to be nationalized. There is alternative talk of creating a "toxic bank" (which could be headquartered in one of those Superfund sites in New Jersey), so that our treasury can buy - at inflated prices - the worst investments that our banks have made. These are both dramatic and potentially necessary moves to save the once-free-lending banking industry from their incredibly bad lending decisions that have finally come home to roost.

With $350,000,000,000 of the bailout money being used to support the bank stock prices - but not to loosen up the lending - even supporters of the bailout are being forced to question if this was a bad idea and a waste of a tremendous sum of Taxpayer money. That judgment should be reserved for the next 120 to 150 days to see what the Obama Administration does to stimulate the credit markets, because as the home theater business suffers, so do all other businesses when nobody will lend anything to anybody. The next $350,000,000,000 will likely be used in very different and much more effective ways - or at least we better pray it is.

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