Surging Auto Sales: The Next Sub-Prime Crime

georgephillip

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Mike Whitney writing on CounterPunch was among the few observers on the left or right side of the political dial to warn about an impending sub-prime mortgage crash that finally hit five years ago.

Mike has currently spotted a similar pattern of corporate deceit in today's "surging auto market"


"Rates are low, credit is easy, underwriting is shoddy, and sales are booming.

There’s your thumbnail sketch of today’s 'surging' auto market.

"It’s a carbon copy of the subprime mortgage fiasco that plunged the economy into recession 5 years ago.

"Now the same nightmare is unfolding in Cartopia, the emerging credit Shangri-la where anyone who can transport himself onto a carlot in an upright position can drive away in a shiny new vehicle no-strings-attached.

"But how can this be happening, you ask?

"Didn’t the US Congress pass strict new regulations, like Dodd-Frank, to prevent the banks and finance companies from lending billions of dollars to borrowers who don’t have the ability to repay the debt?

"Not exactly.

"The fact is, the powerful auto lobby snuck in a neat little provision that exempted them from those nitpicky rules.

"Here’s a little background from Slate’s Matthew Yglesias..."

Easy Lending to Risky Borrowers Makes a Comeback » CounterPunch: Tells the Facts, Names the Names

Maybe we should take a poll about whether this next bankster bubble should burst in November of 2014 or November 2016? Certainly elected Republicans AND Democrats will throw Main Street under the bus again in order to serve Wall Street's Masters of Mankind.
 

iamwhatiseem

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Not to mention the INSANE 0% down, 0 payments for 90 days....72 MONTH loans!!
6.25 years to pay a car off...what kind of idiot...
 
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georgephillip

georgephillip

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Not to mention the INSANE 0% down, 0 payments for 90 days....72 MONTH loans!!
6.25 years to pay a car off...what kind of idiot...
During my 45 years in the work force I never earned more than 19K in a single year.
Some years I earned less than 1K.
Yet, all during the '90s my mailbox filled up with "pre-approved" credit card offers.
I did not understand why I was receiving those offers at that time.


"...It’s also about 'securitization', that is, packaging up the garbage loans into bonds and selling them to suckers looking for a higher yielding investment. That’s what this is really about; scamming people. Take a look at this from Bloomberg:

“The money for subprime loans comes from yield-starved investors who buy bonds backed by them. Issuance of such bonds..."

Easy Lending to Risky Borrowers Makes a Comeback » CounterPunch: Tells the Facts, Names the Names
 

dblack

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In my more paranoid moments it's sometimes tempting to see credit as a replacement (of sorts) for slavery in this country. And I'll confess to a passing sympathy for the Muslims' disdain for usury.
 
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georgephillip

georgephillip

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In my more paranoid moments it's sometimes tempting to see credit as a replacement (of sorts) for slavery in this country. And I'll confess to a passing sympathy for the Muslims' disdain for usury.
What would happen in the US if "property" taxes were ever applied to "intangible" property like stocks and bonds?
 

boedicca

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It's not a coincidence that Subprime Auto Loans dramatically increased after the Gubmint bailed out GM and the Auto Unions, and destroyed years of supply of good used cars in Cash For Clunkers.

Hopenchange!
 

boedicca

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In my more paranoid moments it's sometimes tempting to see credit as a replacement (of sorts) for slavery in this country. And I'll confess to a passing sympathy for the Muslims' disdain for usury.
What would happen in the US if "property" taxes were ever applied to "intangible" property like stocks and bonds?

A huge flight of capital outside of the U.S.

If you want LESS OF SOMETHING, Tax it.
 

Katzndogz

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Don't you want to poor to be able to buy a car? As much as cars cost, they have to have a longer pay off time. Otherwise a car payment becomes as expensive as a mortgage. The government has been pumping money into the economy at a furious rate keeping interest rates. The government has caused car prices to rise with all kinds of mandates for what the car must include.

Cars cost too much. That's why the rich don't buy them. They lease them. With a 72 month loan, pretty much everyone will end up "leasing" cars either on a lease or a purchase plan.

Anyone with an ounce of intelligence could see this coming. It's going to get worse too as cars will have mandates that all cars have GPS locators, black boxes, backup cameras, crash avoidance. Did people think that all the little government mandates would not cause the price of cars to rise? Hey lets give the unions more benefits, just tack it on to the price of the car! There you go. Another good idea to redistribute wealth.
 

TakeAStepBack

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This is the result of the federal reserves actions to maintain cheap M2 through QE and artificially low interest rates. Will we ever manage to pin the proper cuplrit for the business cycle? I doubt it. If we still want to blame corporations and lenders for the Federal Reserves actions after the last fiasco I highly doubt people will start seeing the obvious.

And automotive sales is only the beginning of a bubble priming thorugh the FEDs efforts of cheap money.
 

Katzndogz

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Because of the insane government mandates the price of cars will continue to rise far above the ability of the ordinary person to buy a car. The government is in a very fragile position right now. On the one hand, it wants to eliminate all private ownership of automobiles and force everyone into other forms of transportation. On the other, it has an ideal opportunity to agitate its class warfare by telling the poor that cars cost too much because car makers only want rich people to be able to have cars.
 

dblack

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Don't you want to poor to be able to buy a car? As much as cars cost, they have to have a longer pay off time. Otherwise a car payment becomes as expensive as a mortgage. The government has been pumping money into the economy at a furious rate keeping interest rates. The government has caused car prices to rise with all kinds of mandates for what the car must include.

Cars cost too much. That's why the rich don't buy them. They lease them. With a 72 month loan, pretty much everyone will end up "leasing" cars either on a lease or a purchase plan.

Anyone with an ounce of intelligence could see this coming. It's going to get worse too as cars will have mandates that all cars have GPS locators, black boxes, backup cameras, crash avoidance. Did people think that all the little government mandates would not cause the price of cars to rise? Hey lets give the unions more benefits, just tack it on to the price of the car! There you go. Another good idea to redistribute wealth.
All the better to keep us in debt and spinning the hamster wheels of the war machine.
 

dblack

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Lest we delude ourselves that the debt game is anything new ....

Henry David Thoreau said:
When I consider my neighbors, the farmers of Concord, who are at least as well off as the other classes, I find that for the most part they have been toiling twenty, thirty, or forty years, that they may become the real owners of their farms, which commonly they have inherited with encumbrances, or else bought with hired money- and we may regard one third of that toil as the cost of their houses- but commonly they have not paid for them yet. It is true, the encumbrances sometimes outweigh the value of the farm, so that the farm itself becomes one great encumbrance, and still a man is found to inherit it, being well acquainted with it, as he says. On applying to the assessors, I am surprised to learn that they cannot at once name a dozen in the town who own their farms free and clear. If you would know the history of these homesteads, inquire at the bank where they are mortgaged. The man who has actually paid for his farm with labor on it is so rare that every neighbor can point to him. I doubt if there are three such men in Concord. What has been said of the merchants, that a very large majority, even ninety-seven in a hundred, are sure to fail, is equally true of the farmers. With regard to the merchants, however, one of them says pertinently that a great part of their failures are not genuine pecuniary failures, but merely failures to fulfil their engagements, because it is inconvenient; that is, it is the moral character that breaks down. But this puts an infinitely worse face on the matter, and suggests, beside, that probably not even the other three succeed in saving their souls, but are perchance bankrupt in a worse sense than they who fail honestly. Bankruptcy and repudiation are the springboards from which much of our civilization vaults and turns its somersets, but the savage stands on the unelastic plank of famine. Yet the Middlesex Cattle Show goes off here with eclat annually, as if all the joints of the agricultural machine were suent.
 
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georgephillip

georgephillip

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It's not a coincidence that Subprime Auto Loans dramatically increased after the Gubmint bailed out GM and the Auto Unions, and destroyed years of supply of good used cars in Cash For Clunkers.

Hopenchange!
How many years supply of "good used cars" did the Gubmint destroy?
Link??
CFC=CRA???
 

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