[Don Plumley]

I'm guessing that some banks are simply reducing their line of credit exposure to take pressure off the bottom half of the balance sheet. It is simple enough to look at a generic reduction in property value metric and the computer spits out a list of lower LOC's which helps to reduce the bank's overall loan exposure. Since banks have minimum capital requirements for outstanding liabilities or potential liabilities and they are being forced to write down loans daily, this is just one of the levers they can pull. So I wouldn't take it personally.

As for the purpose of LOC's, you are right that far too many people used them as an ATM. However, it is frankly handy to have an LOC available when you want a chunk of cash without the time pressure to selling stock at the wrong time or other longer-term investments. For example, you might have a CD coming due in a month, but have an opportunity that needs cash today. Or for any cash flow management need. Cash flow management is an appropriate use of an LOC and is how businesses and households are efficiently run.