From what I've been reading, credit-card backed securities are going to be the upcoming wave that kills even more banks.

Apparently big card issuers have, for a couple years, been packaging credit card debt from a bunch of consumers and selling it off in the same way the mortgage banks were doing with mortgages. Only now, the credit cards are starting to experience defaults in the same way that mortgages were a few years back.

My understanding is that, in part, the reduction of credit lines is an attempt to stabilize the credit backing the securities... but from what I've read, it's basically an attempt to close the barn door after the cow has left; most of the people that are or will have problems are people that have leveraged all of their credit lines to the hilt.

The whole situation is fucked. Fair Isaac will end up having to re-structure the FICO score or no one will be able to get credit, which will continue to degrade the economy. Either that, or we will have a gigantic shift back to an all-cash economy, which would also have enormous problems.