More delinquencies seen on all types of loans

NEW YORK – The bill for America’s excessive borrowing during the housing boom has arrived, and more people are having trouble paying it.

JPMorgan Chase & Co. and Wells Fargo & Co., two of the nation’s biggest banks, on Wednesday joined a growing chorus warning that the subprime mortgage mess is just the start of a sweeping lending crisis. And some fear that consumers falling behind on all kinds of loan payments could tip the economy’s scale toward recession.

Strapped consumers are having a tough time making payments on credit cards, home-equity loans, and even for their cars. This has caused three of the top five U.S. commercial banks that have already reported damaging fourth-quarter results to set aside some $12.5 billion to cover future loan losses – and that number will likely grow as the year wears on.

Problems in the subprime mortgage market are rapidly spilling over into other areas of the economy. No matter what the experts call it – a recession, slowdown or even the makings of a depression – it’s clear banks are under mounting pressure to be more cautious about lending.

“If consumption growth stagnates, the odds of a recession are incredibly high,” said Andrew Bernard, director of the Center for International Business at the Tuck School of Business at Dartmouth. “All the pieces of household financial health are starting to be shakier, especially at the low end.”

He and others are paying close attention to what top U.S. banks say about their customers’ payment habits. Many view this as an early indicator about where the overall economy is headed, but there are other signs that are troublesome.

The stock market has had its worst start to the year in three decades, with investors rattled by signs that unemployment is on the rise and retail sales are on the decline. Further, higher costs for energy and food in 2007 pushed inflation for the year up by the largest amount in 17 years.

There was no sign of a turnaround in the last few months of the year. The Federal Reserve reported that the economy grew at a slower pace in late November and December as credit problems intensified and consumers tightened their spending.

To some, it appears that the Fed came to its rate-cutting decision in August a bit late. Others point to the falling dollar and surging oil prices, factors that usually prevent the central bank from easing its monetary policy.

While debate persists about the Fed’s timing and the extent of the slowdown, bank executives – who have scrambled to prepare for another tumble in home prices and higher unemployment in 2008, feel academic definitions are beside the point.

“We’re not predicting a recession – it’s not our job – but we’re prepared,” JPMorgan Chase CEO Jamie Dimon told analysts after the nation’s third-largest bank wrote down $1.3 billion and said profit dropped 34 percent.

His financial institution didn’t do all that bad. Rival Citigroup Inc. fared the worst during the fourth quarter, losing $9.83 billion after writing down the value of its portfolio of mortgage and mortgage-backed products by $18.1 billion.

Wells Fargo, a more traditional bank that avoided last year’s trading woes, saw its profit fall 38 percent due to troubles with home equity loan and mortgage defaults.

JPMorgan is girding for home prices to decline further in 2008 by 5 percent to 10 percent; Citigroup’s estimate of 7 percent falls within that range, too.