The Next Financial Crisis?
I had thought it would be student loans or consumer debt but Erika Eichelberger points out another growing threat to the financial system:
Would you buy a subprime-loan crisis from this man? A new New York Times investigation reveals that used car dealers are doling out giant loans to millions of poor Americans with bad credit. Many of these dealers are using the same negligent lending tactics that subprime mortgage lenders used before the 2008 financial crisis, including ignoring or fabricating information about borrowers’ income, employment, and ability to repay.
Even though this new subprime market is a fraction of the size of the mortgage market, the used-car loan bubble poses substantial risks to banks still recovering from the recession. Delinquent loans are piling up. Banks had to write off an average of $8,541 on each delinquent auto loan in the first three months of 2014, the Times reports. The Office of the Comptroller of the Currency, a federal Wall Street regulator, has warned that banks are taking on too many low-quality auto loans. And it’s not just banks that would be affected if too many used car loans go sour. Auto lenders are pooling bad loans just as subprime mortgage lenders did, and then slicing them up and selling them to investors including hedge funds and pension funds.
Did we not learn anything?
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Copyright 2014 Liberaland
By: Stuart Shapiro
Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.
16 responses to The Next Financial Crisis?
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mea_mark July 26th, 2014 at 11:07
Did we not learn anything? — Yeah, we learned something alright. How to scam the system. No bail-outs this time, if someone is buying bad loans bundled with good ones that is their own darn fault.
mea_mark July 26th, 2014 at 11:07
Did we not learn anything? — Yeah, we learned something alright. How to scam the system. No bail-outs this time, if someone is buying bad loans bundled with good ones that is their own darn fault.
Dwendt44 July 26th, 2014 at 12:17
Who trusts a used car salesman anyway? A car dealer makes more money selling a used car than they do selling a new one. And the rules are ‘looser’ as well so they can get a way with fudging.
Dwendt44 July 26th, 2014 at 12:17
Who trusts a used car salesman anyway? A car dealer makes more money selling a used car than they do selling a new one. And the rules are ‘looser’ as well so they can get a way with fudging.
Abby Normal July 26th, 2014 at 12:33
There is a J.D. Byrider dealership in a nearby town. One day I drove past and noticed they were advertising for a salesman/repo man opening. The same people who sell the cars come and tow them away in the middle of the night. That store also made headlines in the local newspaper when a manager of that location was found dead in a hotel room of a drug overdose. It’s a very high-class operation.
Abby Normal July 26th, 2014 at 12:33
There is a J.D. Byrider dealership in a nearby town. One day I drove past and noticed they were advertising for a salesman/repo man opening. The same people who sell the cars come and tow them away in the middle of the night. That store also made headlines in the local newspaper when a manager of that location was found dead in a hotel room of a drug overdose. It’s a very high-class operation.
Budda July 26th, 2014 at 12:48
The term for this is: fraud.
Budda July 26th, 2014 at 12:48
The term for this is: fraud.
fahvel July 26th, 2014 at 12:59
So stop it!!!!!!!!!!!!!!!!!!!!!!! if not, you deserve what you get.
fahvel July 26th, 2014 at 12:59
So stop it!!!!!!!!!!!!!!!!!!!!!!! if not, you deserve what you get.
fancypants July 26th, 2014 at 16:16
there is a ford dealership near my house that doesn’t mind asking you to pay 16 to 21% on your car loan and have been doing this for several years.
fancypants July 26th, 2014 at 16:16
there is a ford dealership near my house that doesn’t mind asking you to pay 16 to 21% on your car loan and have been doing this for several years.
uzza July 28th, 2014 at 18:15
So banks make bad loans and lose their asses. Where is there a problem?
uzza July 28th, 2014 at 18:15
So banks make bad loans and lose their asses. Is there a problem?
peacedreamer August 9th, 2014 at 00:00
American consumers can rest easy. Banks always cover their butts. Do you suppose the Feds know about this….? The experts on “bad debt” know…
peacedreamer August 9th, 2014 at 00:00
American consumers can rest easy. Banks always cover their butts. Do you suppose the Feds know about this….? The experts on “bad debt” know…