In 2007, their stupid schemes and frauds crashed our economy, destroying middle-class jobs, wealth and opportunities. Far from getting punishment, however, these financial scofflaws were bailed out by their Washington enablers — so the moral lesson they learned was clear: Stupid pays!
These schemes are NOT “stupid”…they are very smart.
Buy enough politicians, crash the economy, and the taxpayer funded bailouts that follow become at least as big a profit center as any other.
Use the windfall from the bailouts to buy more politicians to make sure the next time you crash the economy the bailouts are even bigger.
When the too-big-to-fail banks crashed the economy in 2008 they controlled 25% of US bank assets, so we just had to bail them out so they didn’t take us down with them. Thanks to their friends in Washington DC those banks today control 50% of US bank assets with no end in sight of their march to monopoly.
Thank you, Jim, for once again helping us to see the reality underneath the bull excrement! When are people going to say “enough”? These thieves are our real enemies deserving of strong sanctions!
There’s nothing stupid or harmful occurring with the auto loans. People getting cars so they can drive to work, travel etc is good for them and good for the economy. If / when an auto loan defaults there is no “crisis”, the car is simply repossessed. (many subprime lenders insist on GPS devices in the car for ease of location). These loans and securities aren’t even remotely comparable to the real estate / mortgage crisis of several years ago. Also keep in mind tha cars last longer these days and most new and may used come with warranties so people are able to spread loans out over a longer period of time meaning smaller payments and less chance of default.
As far as housing and Wall St buying up homes and renting them…there is a very simple solution - buy your own house.
By the end of 2009 before Congress was anywhere near finished committed trillions of taxpayers money to bailing out banks and subprime loan fraud was in the news every day, I was watching TV ads admonishing car buyers to sign up for “nothing down loans, we finance everybody”.
Your assertion that “when a car loan defaults, there is no crisis” may be true in a balanced economy, however, one of the monthly editorial in Motor Trend magazine (hardly a lefty alarmist publication) earlier this year expressed :“concern” that car sales during the past five years have been higher than they ever have for a longer period of time than they ever have due to risky financing and record percentages of leased vehicles.
The editorial noted that sales of cars were recently trending down while truck and SUV sales were flattening (noting that auto makers give more incentives to buy them because they have higher profit margins than cars)
The concern expressed is that a combined drop in sales, many buyers being underwater with their 5 to 8 year loan durations, increased defaults and boatloads of vehicles coming off lease at the same time would result in repossessing being more trouble than it is worth with limited demand for repossessions. Many banks would take big hits, Dodd-Frank “bail-in” regulations (that Trump is not eliminating) would result in many depositors losing their savings. Not a crisis of the magnitude of the 2007 housing bubble popping, as long as no other big players in the economic card game don’t happen to be cashing in their chips at the same time…the timing of which none of us can predict.
Other than the trade in of my current car I never put anything down.
During the past couple years several CD commenters have questioned how their neighbors who have been unemployed since the 2008 crash and had their homes foreclosed upon continue to “buy” a new pickup or SUV every three to four years.
Jim’s article and the Motor Trend editorial appear to answer that question.
Maybe, although I doubt that’s happening much. If you’ve truly been unemployed for 8 years you probably aren’t buying a car. Maybe they have jobs that pay less than they made prior to 08.
Either way, newer cars are far better quality than they used to be, are likely to come with warranties and buying them with longer termed loans makes them more affordable to low income / poor credit folks. A win all around.
If everybody getting an auto loan had a job or other means of making payments, Motor Trend would not have written their editorial and Jim would not have written this article. Just as was the case with the housing bubble, credit is being extended to too many borrowers who are at high risk to default.
“A win all around” indeed for buyers who default and banks that can get taxpayer funded bailouts and keep depositors money (per Dodd-Frank bail-in)…not a win for the rest of us.
Driving a 22 year old vehicle and my wife driving a 15 year old vehicle, I concur that “newer cars are far better quality than they used to be”, however, it doesn’t matter what condition a used car is in if large numbers of borrowers default on the financing just as it didn’t matter what condition houses were in when borrowers defaulted on mortgages en masse.
It’s the way farmers went from independence to being sharecroppers in the late 1800’s. It is an old, old scheme, older I would bet than a mere 100 plus years. But this is true of a great deal of what is quickly turning from personal property into rented or leased tools, software, even our access to our very own diaries and personal files as everything is defaulted to “the cloud” for our “convenience.”
Maybe, or it may be leases. I just got a 10-year used old vehicle after my 22-year old vehicle was up for one more expensive repair to make sure the front end didn’t fall out. That and a few other vehicle problems finally convinced me it was time to let go, even though she was otherwise still running. The “new” one has its issues but they seem surmountable although the engineering leave a lot to be desired in terms of design for repair.
However, in this, after I got the 10-year old vehicle someone wondered about leases, something I hadn’t even considered. So I quick-checked the web and sure enough I found new vehicles starting at $150 and up a month (usually in the $200-$300 range) for leasing and a good deal more per month for a purchase. Nice little cars too. You could lease a Ford Focus for $149 (gas powered) and an electric version for about $220 or so. I’m wondering 1) how good those deals and and 2) how many of the new or nearly new shiny cars I’m seeming with young “kids” driving are really leases, not purchases.
Leases are a good way for businesses to go since leases free up a business’ capital to be used for things more beneficial to the success of the business than buying a depreciating asset, and they can expense 100% of the cost each year on their taxes, unlike a purchased asset.
Leases are favorable for personal vehicles if the lease limitations do not contradict the owner’s pattern of ownership such as annual mileage, duration of ownership etc. For somebody who normally keeps a vehicle for more than 5-6 years leases are a more expensive way to go since loan payments eventually end whereas lease payments never end.
Streets filled with gas guzzling antiquated individual motor cars is stupid and irresponsible. A nation filled with economical mass transportation is clearly the way forward. Check in with the rest of the developed world.
But aren’t “the rest of developed world” are a bunch of commies ? No big gubmit for Murka.
Do you believe in democracy? I want to drive. Not walk around and wait for mass transport.
He’s not equating the highlighted statements. It’s both-and.
There were no local buyers in 08-09 (no, not literally “none” so don’t call me out on that - I bought in 08 for example) so investors stepped in and got a bargain. That’s usually how it works when asset prices drop like that.
So I know some people who tried to buy a house at the lows of the market and the people I knew personally lost out of the house by investment companies. Understand these companies are paying cash which can make a big difference. I did hear of second hand accounts were individual buyers got good deals.
Reported the other day----the 3% loan for a house is back-----and some reports of 1% down to buy a house. This will drive up the cost of a house. Its interesting how people don’t grasp that a requirement of 20% down benefits the homeowner. Requiring 20% creates a stable market-----home prices need to drop and wages need to go up—the 20% gets rid of distortions in the market------and I will bet the same could be said for cars----
For years I have been blaming income inequality for the cost of housing but I came at it as a response to the low interest rates which make lending money, except through credit cards, unattractive to investors. This causes those with bulging wallets to diversify by buying real estate.