A story in the Wall Street Journal today links a potential “crimping” in consumer spending to the tighter regulations among mortgage lenders catering to consumers with poor credit — the so-called subprime lenders. (You’ll recall some experts I talked to for this story made a similar link.)

Here’s the scoop from the WSJ‘s subscription-only story:

Only “tentative signs” exist that the increased qualifying standards for people hoping to get a subprime loan have already affected other credit avenues, like credit cards, auto loans or consumer loans. But, just as millions of Americans ramped up their consumer spending power by pulling out thousands of dollars from their home equity when values were appreciating, the current lender pullback could curtail that trend, the story says.

Today, with the housing market in a slump and defaults mounting in the market for subprime home loans, some economists believe more lenders will tighten credit standards in the months ahead as concerns grow about Americans’ heavy debt load and their ability to manage it. “I don’t ever recall a period in history where one credit problem didn’t ripple through to other areas,” says Susan M. Sterne, an economist at Economic Analysis Associates Inc. in Greenwich, Conn.

Such a spillover might force consumers to rein in spending, particularly lower-income Americans, who have piled up debt at a faster clip than their wealthier counterparts in the past decade. That could be a headache for the retailers, restaurateurs and others who depend on their business.

Here’s the bit about all of those home-equity withdrawal loans and that trend’s increase in the last couple of years:

According to Fed data, outstanding debt, including mortgages, for families in the bottom 50% of earners — those with household income below $43,000 — almost doubled to an average $40,676 in 2004 from an inflation-adjusted $20,733 in 1992. Debt outstanding in the top 50% of households rose 83.5% to $150,821 in 2004 from $82,214 in 1992.


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