One of the biggest complaints about the mortgage crisis is that homeowners used their equity irresponsibly during the boom. Now that HELOCs are harder to get, will homeowners spend less? The Wall Street Journal explores this question:

“Steindel [economist at the Federal Reserve Bank of New York] spoke at an event sponsored by the National Economists Club in Washington. He also pointed to a marked decrease in homeowners taking home equity loans since the beginning of 2006 — a decline that he noted was wasn’t accompanied by a corresponding decrease in consumer spending. Steindel argued that consumer spending, until the last two quarters, “has held up pretty strong.”

“Home equity is like an ATM,” Steindel said. “It’s nice to have, but it isn’t what determines your spending.”

That’s certainly an interesting choice of words, since critics have long derided homeowners for withdrawing money from their equity “like an ATM machine.”

See Also: How a HELOC Works

Tags | Heloc, home equtiy line of credit