mattharvest: Marcus Aurelius: The best part about subprime auto loans is that the customers default like crazy from the 20% interest rate, at which point you repossess the car and then sell it all over again.

What a racket.

How is it a racket? Are you saying that the people who take out 20% interest rate loans don't know what they're getting into? If they're so incapable of properly understanding their contract, why are you comfortable with them making any other legal decisions? Should they be wards of the State?

I think he's saying that the banks/investors doing this shouldn't be allowed to regardless of whether or not they're able to sucker people in.

Y'know, like we do with other rackets.

Alright! Let's find out who's got the most exposure, and begin shorting their investments!

I can see it now, "the great automobile crash of 2012".

mattharvest: How is it a racket? Are you saying that the people who take out 20% interest rate loans don't know what they're getting into?

Are you saying the banks don't know what they're getting into?

This is nothing new. These loans and their 72 - 96 month terms have been around for years.

This one I don't think I'm going to have to worry about.

Seeing as the kind of car I tend to get is 'something with at least 125,000 miles on it'. I'm basically the last guy to own any given car before it goes to the demolition derby.

ongbok: This is nothing new. These loans and their 72 - 96 month terms have been around for years.

The point is not the loans but the securitization of bundles of these loans as AAA based mainly on having many thousands of loans bundled together. The point is that any market wide effect that results in more people than anticipated defaulting then the securities could easily fall apart like the mortgage market did especially since we are dealing with people with bad credit history.

Gosling: This one I don't think I'm going to have to worry about.

Seeing as the kind of car I tend to get is 'something with at least 125,000 miles on it'. I'm basically the last guy to own any given car before it goes to the demolition derby.

Same here. I don't understand car loans.

I mean, I understand that most people would need a loan to buy a $40,000 vehicle; what I don't understand is why any sane person would pay that much for a car.

Gosling: This one I don't think I'm going to have to worry about.

Seeing as the kind of car I tend to get is 'something with at least 125,000 miles on it'. I'm basically the last guy to own any given car before it goes to the demolition derby.

Yeah, but what if they find a way of disguising what a bad investment the debt is and the world has another recession based around toxic amounts of unpayable debt.

What do you expect? It's farking America. Our business model is fraud.

ongbok: This is nothing new. These loans and their 72 - 96 month terms have been around for years.

Crazy Eddie's Used Car Emporium may have been doing this for years. Now Crazy Eddie is selling the loan to a investment bank, who is turning around and resellling a big pile of subprime loans as a AAA rated security. Ya know, when it's really not worthy of a AAA rating. Sound familiar yet?

you have to have a $48,000 car to go with a $280,000 house and $85,000 education
what is wrong with you farkers.

Soon to be a glut of new-ish used cars on the market? Sweet!

Jesus people. Stop buying cars on credit. It's moronic.

Unless you're desperate and need a car that day and have no money, don't do it.

But it's really important to look cool in your brand new car, isn't it?

Just great. As if these assholes haven't fu(ked over the entire economy enough already.

I've only puchased one car brand new. I got a 72 month / 0% loan. Price was more than agreeable and I usually drive my vehicles for 8-10 years, so I felt good about the deal.

Of course, I bought a Saturn, so I guess the joke was on me.

badhatharry: The government, Bill Clinton and Janet Reno, forced banks to make sub-prime loans. The banks just figured out a way to make money off them until the scheme collapsed.

You are an idiot. Please turn in your thumbs and join the rest of the invertebrates.

The nice thing about cars is that they have a much shorter service life and are mobile...I.e., you can always unload them to other developing countries.

Not quite the same as the housing market.

This shiat will continue in one form or another until the directors of ratings agencies are held civilly (perhaps it will even take criminally) liable for mis-ratings.

Anyone who trusts these ratings agencies deserves to loose their shirt.

I'll just keep pining away for some method of stopping private market actors from bribing politicians into making me pay for the eventual and inevitable failures of their "products".

Hoarseman: ongbok: This is nothing new. These loans and their 72 - 96 month terms have been around for years.

The point is not the loans but the securitization of bundles of these loans as AAA based mainly on having many thousands of loans bundled together. The point is that any market wide effect that results in more people than anticipated defaulting then the securities could easily fall apart like the mortgage market did especially since we are dealing with people with bad credit history.

I think the problem is more that the sellers can make up any arbitary bond scheme they like, knowing roughly how valuable the inputs are, submit the various chopped up loans for ratings from the agencies, and then if the result doesn't end up worth more than what they started with they cancel the issue, and rechop them a different way until the rating agencies underestimate the aggregate risk of the various different products and essentially rate the total as worth more than it originally was, then the bank sells off that version. Basically the entire purpose of these schemes is to monetize the information asymmetry between seller and buyer.

bootman: This shiat will continue in one form or another until the directors of ratings agencies are held civilly (perhaps it will even take criminally) liable for mis-ratings

If those you rate pay you for a rating, there is no such thing as a mis-rating.

Hoarseman: ongbok: This is nothing new. These loans and their 72 - 96 month terms have been around for years.

The point is not the loans but the securitization of bundles of these loans as AAA based mainly on having many thousands of loans bundled together. The point is that any market wide effect that results in more people than anticipated defaulting then the securities could easily fall apart like the mortgage market did especially since we are dealing with people with bad credit history.

This is nothing new. The finance arms of major automotive manufacturers have been doing this for years. They often use them as backing for corporate paper (bonds and their derivatives) to get short-term capital for expansions. Some automotive manufactures use them to fund vehicle purchases for their dealers.

There's an entire suite of quantitative economics modelling software designed especially for bonds and derivatives like this.

It's all in the packaging, and the CFOs of the finance arms for the major automotive manufacturers are encouraging short term profitable packaging regardless of the hidden risks involved. They're looking to be a bigger profit center. One major automotive financial arm has been highly rated and a profit center for years doing this.

If you call them on it, you will go down, you will be terminated, and you will not work in that industry again.

/ not so cool story, bro
// it's life, or what's left of it

Lt. Col. Angus: I've only puchased one car brand new. I got a 72 month / 0% loan. Price was more than agreeable and I usually drive my vehicles for 8-10 years, so I felt good about the deal.

Of course, I bought a Saturn, so I guess the joke was on me.


Ok, I guess it's hard to pass up 0% interest. I stand somewhat corrected.

this shiat goes back to the buyer
buy new 2004 hyundia for$12,000 pay $125. + 8%=137.50 for 96 months, in 4 years you going to have over 100,000 miles on a piece of shiat that you still owe $7,600 and you probably already spent at leat a grand fixing the terd at some point.
fast foward now it's 2008 you just made you last payment and the car was sold for scrap last year.

Flargan: bootman: This shiat will continue in one form or another until the directors of ratings agencies are held civilly (perhaps it will even take criminally) liable for mis-ratings

If those you rate pay you for a rating, there is no such thing as a mis-rating.

Silly me. I was foolishly operating under the assumption that a securities rating is supposed to have some correlation to the likelihood of default. You appear to be correct, the rating is just a reflection of how much the ratings agency is paid.

I'll just patiently wait for the invisible hand of the market to ball up and fist this imbalance.

Gosling: This one I don't think I'm going to have to worry about.Seeing as the kind of car I tend to get is 'something with at least 125,000 miles on it'. I'm basically the last guy to own any given car before it goes to the demolition derby.

I'm hoping to own a car from the same decade I'm living in someday. But my last car was 18 years old when I got it, so I'm not reaching my goal very fast.

cryinoutloud: Gosling: This one I don't think I'm going to have to worry about.Seeing as the kind of car I tend to get is 'something with at least 125,000 miles on it'. I'm basically the last guy to own any given car before it goes to the demolition derby.

I'm hoping to own a car from the same decade I'm living in someday. But my last car was 18 years old when I got it, so I'm not reaching my goal very fast.

there might be some 2004 hyundais you can afford

My car is 5 years old and only has 21k miles on it.

Wow. Government Motors is on the path to complete recovery.

bootman: I'll just patiently wait for the invisible hand of the market to ball up and fist this imbalance.

Everything has value, including conflict of interest and fraud.

:)

jigger: Jesus people. Stop buying cars on credit. It's moronic.

Unless you're desperate and need a car that day and have no money, don't do it.

But it's really important to look cool in your brand new car, isn't it?

Look who didn't read the article!

Obviously, this is the fault of poor, stupid people.

Ergo, vote Republican.

bootman: Flargan: bootman: This shiat will continue in one form or another until the directors of ratings agencies are held civilly (perhaps it will even take criminally) liable for mis-ratings

If those you rate pay you for a rating, there is no such thing as a mis-rating.

Silly me. I was foolishly operating under the assumption that a securities rating is supposed to have some correlation to the likelihood of default. You appear to be correct, the rating is just a reflection of how much the ratings agency is paid.

I'll just patiently wait for the invisible hand of the market to ball up and fist this imbalance.

I'm curious why some enterprising lawyers or attorneys general haven't started suing the rating agencies for malpractice or whatever it would be termed when defaults occur and the rating was clearly bogus.

haywatchthis: you have to have a $48,000 car to go with a $280,000 house and $85,000 education
what is wrong with you farkers.

As someone who has a car that was $100,000 new (didn't pay anywhere near that), lives in a town where you're lucky to find a house for under $1,000,000 and is going to be spending about $100,000 for school (commercial aviation) I find your statement amusing.

jjorsett: I'm curious why some enterprising lawyers or attorneys general haven't started suing the rating agencies for malpractice or whatever it would be termed when defaults occur and the rating was clearly bogus.

If they think you are capable of winning, they will hire you.

If they think you are not capable of winning, they will ignore you.

Just find a lawyer who doesn't put money ahead of what is right.

change1211: haywatchthis: you have to have a $48,000 car to go with a $280,000 house and $85,000 education
what is wrong with you farkers.

As someone who has a car that was $100,000 new (didn't pay anywhere near that), lives in a town where you're lucky to find a house for under $1,000,000 and is going to be spending about $100,000 for school (commercial aviation) I find your statement amusing.

i left out the $24,00 salery because i didn't want people to say "hay we need to raise taxes on all those people working at pizza hut" they shouldn't be able to afford all those nice things

TARP, cash for clunkers. It's all been done before.

nigeman: TARP, cash for clunkers. It's all been done before.

Just wait till we unveil our new college program: Cash for Flunkers

//Cs may get degrees but Fs get debt forgiveness

jjorsett: I'm curious why some enterprising lawyers or attorneys general haven't started suing the rating agencies for malpractice or whatever it would be termed when defaults occur and the rating was clearly bogus.

A quick glance at the market caps of the ratings agencies suggests to me that there is a comparatively small amount of blood to squeeze out of that turnip. Just a WAG, but I would not be surprised to learn that their indemnification/insurance coverage is geared toward prolonged litigation rather than cash settlement.

badhatharry: The government, Bill Clinton and Janet Reno, forced banks to make sub-prime loans. The banks just figured out a way to make money off them until the scheme collapsed.

You do know that the primary defaulters were not the poor people. And you do know the government doesn't force banks to make loans to people who aren't poor. So, you cannot blame this on the government...except for the part where the government decided to deregulate. And, yeah, you can blame Clinton. He signed off on that bullshiat. But guess which party led the charge on deregulation? Guess which party is still pushing for deregulation in the face of, well reality?

As someone who's financiql education consists of reading Michael Lewis books and listening to Planet Money, this article reads like someone who got their financial education listening to sample chapters of Michael Lewis audiobooks and having his friend describe episodes of Planet Money. There's a lot of thin reasoning, rampant speculation, and misapplied buzz phrases in this article. In other words, its Kos.

Putter: mattharvest: Marcus Aurelius: The best part about subprime auto loans is that the customers default like crazy from the 20% interest rate, at which point you repossess the car and then sell it all over again.

What a racket.

How is it a racket? Are you saying that the people who take out 20% interest rate loans don't know what they're getting into? If they're so incapable of properly understanding their contract, why are you comfortable with them making any other legal decisions? Should they be wards of the State?

I think he's saying that the banks/investors doing this shouldn't be allowed to regardless of whether or not they're able to sucker people in.

Y'know, like we do with other rackets.

Plus, it's not like most of these people have other options for loans. This is preying upon the poor. And it's not like there are readily alternative forms of transportation that people can use to reach their jobs.

(I know the last part for a fact. When I moved to a state where I needed a car, I decided to take public transport until I could afford a decent used car for cash. I had no intention of taking on a car payment.

My typical transport time was five hours for a round trip. This was for a trip that took less than 15 minutes one way once I bought a car. Once, my bus from work missed the connection downtown. I left work at 5:30, and, when arrived home, it was nearly 10PM. I now live in a suburb. The bus commute would be even worse.)