The Financial Times and The Wall Street Journal pull out their crystal balls to predict what the credit crunch will squash next. It’s not a good sign that they come up with two different answers.

The FT on page one says regional lenders in the U.S. are the next to get hit hard as home-equity loans become “the next front” of the crisis. That doesn’t seem like too controversial a thesis, so the paper should have been able to come up with a comment from someone other than an unnamed “Wall Street executive.”

Homeowners, of course, used their houses like ATMs during the fevered run-up in prices that took hold in many markets, especially on the coasts. Now, with the boom going the other way, that’s eroding whatever equity margin was left for many of these borrowers.

The FT says home-equity loans are about 11 percent to 13 percent of the portfolios of the top thirty banks, but that rises to more than 20 percent at some banks and there’s $625 billion of the things outstanding.

The Journal on C1 says wait a minute, something called “Corporate synthetic collateralized debt obligations” could be the next area of woe.

If you’re still reading after that last sentence, synthetic CDOs are investments that sell insurance against debt defaults (credit-default swaps). Corporate synthetic CDOs sold swaps on corporate bonds, and the Journal says the downturn in the economy is making these bets look “shakier.”

That could trigger downgrades in the $6 trillion market, forcing some investors to sell their securities or at least post significant losses.

Fitch Ratings is getting ready to revisit its ratings on the confangled things, and an outside report says it could downgrade about half of the $50 billion of them it rates. But the WSJ says the problems “probably won’t be as bad” as those of mortgage CDOs.

$4 gasoline hits rural poor hardest

The WSJ and The New York Times each post page-one stories flagging the dawn of $4 a gallon gasoline across the U.S.

The Times weaves the news into a nice report out of how the burden is falling disproportionately on rural Americans. On average, people in the U.S. spend 4 percent of their income on fuel (though the WSJ says that number is 6 percent of “wage income”), but in a handful of rural southern counties the number tops 13 percent, “rivaling what families spend on food and housing.”

Anthony Clark, a farm worker from Tchula, (Mississippi) says he prays every night for lower gasoline prices. He recently decided not to fix his broken 1992 Chevrolet Astro van because he could not afford the fuel. Now he hires friends and family members to drive him around to buy food and medicine for his diabetic aunt, and his boss sends a van to pick him up for the 10-mile commute to work.

A trip from Tchula to the nearest sizable town about 15 minutes away can cost him $25 roundtrip—for the driving and the waiting. That is about 10 percent of what he makes in a week.

The Times story is a document of the pain gripping Americans on the margins of the economy, and while it focuses on rural areas, it’s worth remembering that these things are happening to those on the fringes of the urban economies, too, (though probably less because of the shorter drives) the majority of which don’t have decent alternative-transportation systems.

Sociologists and economists who study rural poverty say the gasoline crisis in the rural South, if it persists, could accelerate population loss and decrease the tax base in some areas as more people move closer to urban manufacturing jobs. They warn that the high cost of driving makes low-wage labor even less attractive to workers, especially those who also have to pay for child care and can live off welfare and food stamps.

“As gas prices rise, working less could be the economically rational choice,” said Tim Slack, a sociologist at Louisiana State University who studies rural poverty. “That would mean lower incomes for the poor and greater distance from the mainstream.”

Suddenly, commuter towns don’t look so good

Jumping off from that part of the Times story, we’re likely to see a landmark shift in the living patterns of Americans if the high price of getting places continues—and who thinks it’s going to go down much? Bloomberg takes note of this in a story on how gas prices are hurting consumer wealth by reducing the value of houses in far-out suburbs.

Emerging suburbs and exurbs—commuter towns that lie beyond cities and their traditional suburbs—grew about 15 percent from 2000 to 2006, nearly three times as fast as the U.S. population, as Americans moved further out in search of more affordable houses or the bigger ones that are sometimes derided as McMansions.

“It was drive until you qualify” for a mortgage, says Robert Lang, director of the Metropolitan Institute at Virginia Tech in Alexandria, Virginia. “You can’t do that anymore. Your cost of transportation will spike too much.”

That’s the Quote of the Day.

Reading the bond leaves

The Journal on C1 says that bond prices across the world are signaling rising economic distress, something that could knock out “an important prop from under the stock market” (and, we’d add, the broader U.S. economy, which has been shored up somewhat by rising exports).

In Europe, long-term bond yields are below short-term yields, a rare occurrence called an “inverted yield,” which almost always precedes an economic downturn as investors flock to the safety of long-term bonds. But in Asia, bond yields are signaling worries about inflation, the paper says.

This reflects the tug of war at work in the global economy. Many developed economies are still hurting because of the collapse of real-estate markets and the credit crunch. Wednesday the Eurostat statistics agency said retail sales in the 15 countries that share the euro fell in April for the third straight month, surprising analysts who had been predicting an increase.

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