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Thanks Ben Bernanke: Using A Shotgun As Down Payment For A Car

Tyler Durden's picture


Thanks to the Fed's ZIRP, the investing world is on a constant reach for yield; and due to the fact that the last bubble of investor largesse (ignoring leverage and reality) was not 'punished' but in fact 'bailed-out', participants in the financial markets learned nothing. Just as the last crisis was formed on the back of an insatiable mortgage-backed security market desperate for new loans (any loans) of increasingly dubious quality to securitize, so this time it is subprime auto loans that have taken over. As a Reuters review of court records shows, subprime auto lenders are showing up in a lot of personal bankruptcy filings. At car dealers across the United States, loans to subprime borrowers are surging - up 18% in 2012 YoY, to 6.6 million borrowers. Subprime auto lending is just one of several mini-bubbles the bond-buying program has created across a range of assets; "it's the same sort of thing we saw in 2007, people get driven to do riskier and riskier things." Of course, with auto production having been the backbone of so many macro data points that are used to 'show' the real economy recovering (despite the channel-stuffing), now that the growth in auto-sales are stalling, it is for the subprime originators "under extreme pressure to hit goals" in their boiler-room-like dealings to extend loans (at ever higher rates) and securitize while the Fed 'music' is still playing. It seems we truly never learn.

Via Reuters,

How The Fed Fueled An Explosion In Subprime Auto Loans


Thanks largely to the U.S. Federal Reserve, Jeffrey Nelson was able to put up a shotgun as down payment on a car.


Money was tight last year for the school-bus driver and neighborhood constable in Jasper, Alabama, a beaten-down town of 14,000 people. One car had already been repossessed. Medical bills were piling up.


And still, though Nelson's credit history was an unhappy one, local car dealer Maloy Chrysler Dodge Jeep had no problem arranging a $10,294 loan from Wall Street-backed subprime lender Exeter Finance Corp so Nelson and his wife could buy a charcoal gray 2007 Suzuki Grand Vitara.


All the Nelsons had to do was cover the $1,000 down payment. For most of that amount, Maloy accepted Jeffrey's 12-gauge Mossberg & Sons shotgun, valued at about $700 online.


In the ensuing months, Nelson and his wife divorced, he moved into a mobile home, and, unable to cover mounting debts, he filed for personal bankruptcy. His ex-wife, who assumed responsibility for the $324-a-month car payment, said she will probably file for bankruptcy in a couple of months.


When they got the Exeter loan, Jeffrey, 44 years old, was happy "someone took a chance on us." Now, he sees it as a contributor to his financial downfall. "Was it feasible? No," he said.


At car dealers across the United States, loans to subprime borrowers like Nelson are surging - up 18 percent in 2012 from a year earlier, to 6.6 million borrowers, according to credit-reporting agency Equifax Inc. And as a Reuters review of court records shows, subprime auto lenders are showing up in a lot of personal bankruptcy filings, too.


It's the Federal Reserve that's made it all possible.




The Fed's program, while aimed at bolstering the U.S. housing and labor markets, has also steered billions of dollars into riskier, more speculative corners of the economy. That's because, with low interest rates pinching yields on their traditional investments, insurance companies, hedge funds and other institutional investors hunger for riskier, higher-yielding securities - bonds backed by subprime auto loans, for instance.




Lenders like Exeter have rushed to meet that demand. Backed by Wall Street banks and big private-equity firms, they have been selling ever-greater amounts of subprime auto loans in the form of relatively high-yield securities and using the proceeds to fund even more lending to more subprime borrowers.




Consider that in 2012, lenders sold $18.5 billion in securities backed by subprime auto loans, compared with $11.75 billion in 2011, according to ratings firm Standard & Poor's. The pace has continued so far this year, with $5.7 billion of the securities issued, compared with $4.4 billion for the same period last year, according to Deutsche Bank AG. On Monday alone, three deals totaling $1.6 billion of subprime auto securities were announced by Wall Street banks.


To make up for the risk of taking on increasing numbers of high-risk borrowers, subprime auto lenders charge annual interest rates that can top 20 percent.


The Exeter loan Nelson and his wife got, for example, carried a 21.95-percent rate.




Critics of the Fed say the growth in subprime auto lending is just one of several mini-bubbles the bond-buying program has created across a range of assets - junk bonds, subprime mortgage securities, and others.




"It's the same sort of thing we saw in 2007," said William White, a former economist at the Bank for International Settlements. "People get driven to do riskier and riskier things."




"We are sailing deeper into uncharted waters," Fisher said in a speech six days after the Fed's September 13 announcement of QE3. "Why would the Fed provision to shovel billions in additional liquidity into the economy's boiler when so much is presently lying fallow?"




Subprime auto loans may seem like an obscure corner of finance, but the names behind the expansion are familiar.


Santander Consumer USA Inc, a unit of giant Spanish bank Banco Santander SA, is one of the biggest sellers of securities backed by subprime auto loans, according to S&P. In 2011, KKR & Co, Warburg Pincus and Centerbridge Partners bought a 25 percent stake in the Santander unit for $1 billion.


Capital One Financial Corp, General Motors Co and Ally Financial Inc are also steadily increasing loans to subprime borrowers.




Less well-known upstart Exeter, founded in 2006 and based in Irving, Texas, is run by executives from AmeriCredit Corp, an auto-finance company acquired by General Motors in 2010. It reported $100 million in originations in May 2010. It expected to hit $1 billion in 2012 and $2.2 billion by 2015




In 2008, a Goldman Sachs Group Inc fund, through an investment in a private-equity fund, helped infuse money into Exeter. Then, in 2011, Blackstone bought its controlling stake




After the Blackstone deal, in particular, the push was on for Exeter to expand its loan book, according to a former employee. "Everybody was under extreme pressure to hit goals," this person said. "Your job is in jeopardy. It was not sugar-coated."




Exeter touts the firm's "highly sophisticated risk management process," which employs a "decision science" system underpinned by "predictive models." The marketing book adds: "The end result is to deploy tools to management allowing for precision control over credit performance."




This process results in customers with an average credit score of 556 and average annual income of $38,393, according to the pitch book. These borrowers pay an average interest rate of 21.4 percent a year.




Moody's Investors Service, in a move rare among ratings agencies, issued a report in March 2012 saying it would not have assigned a high investment-grade rating to the notes. "Exeter is small and unrated, with limited experience and little asset performance history," it said.




Regardless of the relative safety of such securities, a rapidly growing lending business that bakes into its assumptions a 25 percent failure rate is almost certain to result in more people defaulting on more loans. In 2011, Exeter Finance was listed as a creditor or participant in 252 bankruptcy proceedings. In 2012, the number increased to 1,144.




...bulk of the filings he works on involve subprime debt - loans his clients shouldn't have gotten in the first place. "Most of them that's getting those types of loans are the same ones who's getting the cash loans or payday loans or title loans," Wadsworth said.


Charles Thomas, an electrician in Park Forest, Illinois, filed for Chapter 7 bankruptcy only four months before he took out loans from Exeter and Santander in November 2011.


Efforts to buy a car failed at six different dealers, but an online car-loan application he had filled out prompted an employee from Family Hyundai to call: Thomas had been preapproved... (Thomas's bankruptcy court filing lists personal property of $25 in a checking account, $1,000 in household goods and $300 in clothing).




Despite the risk that borrowers like Thomas present, investors have proved increasingly willing to put their money into subprime auto debt for lower relative returns. According to Barclays Plc, the average spread - a measure of investors' risk tolerance - between top-rated securities underpinned by prime and subprime auto loans and a benchmark interest rate hit 0.32 percentage point in February. That represents a remarkable increase in risk appetite from the 8.85-percentage-point spread at the peak of the financial crisis in autumn 2008.




With so much investor money backing subprime auto loans, and the resulting expansion of lending to questionable borrowers, some market watchers are beginning to sound alarms - albeit muted ones. Fitch Ratings in March said it was "concerned that the competitive landscape is creating an environment that encourages lenders to compete by easing credit terms."


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Wed, 04/03/2013 - 11:03 | 3403291 Kaiser Sousa
Kaiser Sousa's picture

they didnt mention this caveat on CNBC so you must be lying Tyler's!!!!!!!!!!!!!!!

20% interst rate....what a fucking bargain...

goin out and get me a Hemi.......



Wed, 04/03/2013 - 11:07 | 3403323 DJ Happy Ending
DJ Happy Ending's picture

This dovetails perfectly with Biden's advice to buy a shotgun. Coincidence? I don't think so.

Wed, 04/03/2013 - 11:23 | 3403421 Cult_of_Reason
Cult_of_Reason's picture

Rumor says that Stanley "Stan" Fischer has advised Ben "Money Printer" Bernanke to secretly apply for asylum in Israel, "just in case as a back-up plan B". What is the probability this rumor is true?

Also, allegedly, Alan "Asshole" Greenspan has already obtained dual Israeli citizenship. What is the probability this rumor is true?

Wed, 04/03/2013 - 11:24 | 3403450 otto skorzeny
otto skorzeny's picture

mayors rahm and jewberg already have it

Wed, 04/03/2013 - 11:33 | 3403514 Cult_of_Reason
Cult_of_Reason's picture

Banksters Blankfein & Dimon probably already have it too.

Wed, 04/03/2013 - 12:00 | 3403588 AlaricBalth
AlaricBalth's picture

Very good paper from NBER. Although written in 2007, it remains statistically relevant.

Why Subprime Auto Loans Default

"The average purchaser finances around 90 percent of the price of the automobile, with the average loan size being around $11,000. Repayment is highly uncertain: more than half of the loans default, and the majority of these default within the first year of repayment."


Wed, 04/03/2013 - 12:22 | 3403772 ghandi
ghandi's picture



"...After the Blackstone deal..."

Shitttttt, you know a company is gonna die or burst infected with disease if Blackstone (aka Satan) gets involved.

Wed, 04/03/2013 - 12:33 | 3403835 prodigious_idea
prodigious_idea's picture

"20% interst rate....what a fucking bargain"


20% is as good as it gets - and that's generally just for new vehicles.  Used car rates are nearly always greater than 20% and 30+ isn't unusual.  The only number that matters to the borrower is the monthly payment.

Wed, 04/03/2013 - 15:01 | 3404650 johnQpublic
johnQpublic's picture

just wait til people are using their car as down payment on a shotgun

Wed, 04/03/2013 - 15:12 | 3404709 Shizzmoney
Shizzmoney's picture


What is the probability this rumor is true?

1% - but I'm giddy at the prospect of all of these assholes leaving.

Wed, 04/03/2013 - 11:25 | 3403459 TheFourthStooge-ing
TheFourthStooge-ing's picture

So did the shady corporate person known as Exeter Finance pass a background check for that shotgun?

Wed, 04/03/2013 - 19:45 | 3406145 StychoKiller
StychoKiller's picture

So, the car dealer got a shotgun to blow away zombies in the future?  Kewl! :>D

Wed, 04/03/2013 - 11:36 | 3403524 GOSPLAN HERO
GOSPLAN HERO's picture

Gun = cash.

Gold = cash.

Silver = cash.

Ammo = cash.


Wed, 04/03/2013 - 13:42 | 3404202 DoneThis2Long
DoneThis2Long's picture

And the gooberment wants to control or ban all of them!!!

Ironically, all gun-grab schemes are pimped and pumped by Bloomberg, Rham, Feinstein, Bloomenthal, Schumer, etc etc etc. You'd think they know better. Even Reid stayed the fuck out of this one. Interesting. Of course, they all have their own protection and heat.

Wed, 04/03/2013 - 11:07 | 3403329 malikai
malikai's picture

No worries, the fed will be buying these too, at par, from your favorite PD.

Wed, 04/03/2013 - 11:10 | 3403341 McMolotov
McMolotov's picture

This country is fucked up beyond repair. A nation of debt slaves cannot survive.

Wed, 04/03/2013 - 11:23 | 3403437 otto skorzeny
otto skorzeny's picture

debtor's prison for the debtors-guarding them will bring employment-WINNING

Wed, 04/03/2013 - 11:49 | 3403580 foodstampbarry
foodstampbarry's picture

I saw the writing on the wall in 08 when the Marxist was elected. This was the plan from day 1 of his administration - Over burden the system with extreme debt. The communists have won.

Wed, 04/03/2013 - 12:16 | 3403733 snakeboat
snakeboat's picture

He is but a puppet.

Wed, 04/03/2013 - 13:26 | 3404132 General Decline
General Decline's picture

Do you really think so?  I believe he calls all the shots.  Afterall, he is the most powerful man in the world.



Wed, 04/03/2013 - 11:13 | 3403366 torak
torak's picture

"It seems we truly never learn."

Please use the word "THEY" instead of "WE".   'We' don't have much of anything to do with this never-ending stupidity. 

Wed, 04/03/2013 - 11:49 | 3403593 Urban Redneck
Urban Redneck's picture

OVER A DECADE AGO I got told in no uncertain terms to stuff my reservations and sign off on a lending product roll-out because I wanted to see the underlying formulas Fair Isaac was using for its "highly sophisticated risk management process," which employed a "decision science" system underpinned by "predictive models." allowing us  "precision control over credit performance."  Not surprisingly I got out, and they got a bailout.


Rinse, Repeat.


However, since a handful of bankers are capable of pushing a few billion of product into the quivering hands of the debt-addicts, I think the democratic "we" is sickeningly appropriate.

Wed, 04/03/2013 - 18:47 | 3405900 MisterMousePotato
MisterMousePotato's picture

aka: I get the kind of government that THEY deserve.

Wed, 04/03/2013 - 11:50 | 3403590 mr1963
mr1963's picture

You see cars running in parking lots all over. Reason, you turn it off the lender can shut it down, then repo it. You leave it running, they can't shut it down. We see it all the time.

Wed, 04/03/2013 - 14:56 | 3404623 prodigious_idea
prodigious_idea's picture

Running or not, those devices almost always have GPS so they can find the vehicle practically anywhere.  Never turning off the ignition doesn't do anything to avoid repo.  Probably makes it easier since the keys are in the ignition when the repo crew shows up. 

Wed, 04/03/2013 - 11:04 | 3403293 TeamDepends
TeamDepends's picture

Does Hyundai make a van big enough to live in?

Wed, 04/03/2013 - 11:07 | 3403315 Buckaroo Banzai
Buckaroo Banzai's picture

It all depends on how big you are. The good news is, it's my understanding that you can park it down by the river.

Wed, 04/03/2013 - 11:15 | 3403383 McMolotov
McMolotov's picture

I miss Chris Farley. It's a shame we lose so many fat, funny guys instead of bankers and politicians.

Wed, 04/03/2013 - 11:21 | 3403426 TeamDepends
TeamDepends's picture

Indeed.  His "motivational speaker" was all-time.

Wed, 04/03/2013 - 11:41 | 3403539 TeamDepends
TeamDepends's picture

Perhaps one of you interweb gurus could provide a video link.  Might brighten someones day.

Wed, 04/03/2013 - 12:43 | 3403890 McMolotov
McMolotov's picture

Fucking Phil Hartman's dead, too, dammit.

Wed, 04/03/2013 - 11:36 | 3403521 Buckaroo Banzai
Buckaroo Banzai's picture

His brother, Kevin Farley, does stand-up. Opens for David Spade.

Wed, 04/03/2013 - 13:30 | 3404150 General Decline
General Decline's picture

I met Chris down on Rush street one night many moons ago.  What a cool, down-to-earth guy. 

Wed, 04/03/2013 - 14:22 | 3404405 vulcanraven
vulcanraven's picture

Ok I gotta step in here for a second....


I met Chris Farley too, about a month before he overdosed. I was born and raised in Los Angeles (yes I know, I live in hell on earth) so celebrity citings are pretty common. Was at this bar called Hollywood Moguls one night and went up to get a drink, found myself standing next to a completely coked out and belligerent Chris Farley. Our conversation follows:



Me: Yeah man, what movie?

Chris: OH..... It's called "SHIT MONSTERS"

Me: What? Never heard of it, what is it about?


Me: Sounds awesome dude, can't wait to see it


Then he was wisked away by the two porn broads he happened to be hanging with.

Cool story bro.

Wed, 04/03/2013 - 17:36 | 3405620 TeamDepends
TeamDepends's picture

Moral of the story:  Cocaine is evil.

Wed, 04/03/2013 - 19:51 | 3406161 StychoKiller
StychoKiller's picture

Yet, pr0n broads seem to like it...

Wed, 04/03/2013 - 11:03 | 3403295 Bodhi
Bodhi's picture

This will end in tears.

Wed, 04/03/2013 - 11:10 | 3403340 Cursive
Cursive's picture


The crying has already begun.  The Nelson's marriage already ended in divorce (she kept the Suzuki) and the Constable is driving a potential repo and looking for a new iPhone.

Wed, 04/03/2013 - 11:21 | 3403431 Stoploss
Stoploss's picture

Without a shotgun too.

Wed, 04/03/2013 - 11:10 | 3403345 otto skorzeny
otto skorzeny's picture

or bloodshed

Wed, 04/03/2013 - 11:12 | 3403368 duo
duo's picture

It will end in a lot of nice cars coming off lease in about 4 years.

Wed, 04/03/2013 - 11:18 | 3403400 otto skorzeny
otto skorzeny's picture

by then we will be in a "Road Warrior" type situation to fill them with gas

Wed, 04/03/2013 - 11:24 | 3403451 McMolotov
McMolotov's picture

Long shoulder pads and assless chaps.

Wed, 04/03/2013 - 11:26 | 3403476 otto skorzeny
otto skorzeny's picture

how did you know what I am wearing right now?

Wed, 04/03/2013 - 13:20 | 3404099 duo
duo's picture

you'll probably need kneepads in that case

Wed, 04/03/2013 - 11:04 | 3403297 catacl1sm
catacl1sm's picture

Something about doing the same thing over and over and expecting different results... oh yeah.. YOU'RE CRAZY!

Wed, 04/03/2013 - 11:13 | 3403378 GeezerGeek
GeezerGeek's picture

At least the enlightened elitists and the TBTF banksters will never revisit subprime loans on houses, because we all know how that turned out. Right?



Wed, 04/03/2013 - 13:00 | 3403985 ghostfaceinvestah
ghostfaceinvestah's picture

Not to mention piggyback loans:

Piggyback HELOCs May Be Staging a Post-Crisis Comeback By  APR 3, 2013 11:05am ET

Piggyback mortgages all but disappeared following the housing bust but they appear to be staging a comeback as lenders continue to gain confidence in the housing recovery.

Wed, 04/03/2013 - 11:03 | 3403298 bearish1
bearish1's picture

But, but, but......It will work this time!!

Wed, 04/03/2013 - 11:07 | 3403322 Buckaroo Banzai
Buckaroo Banzai's picture


Wed, 04/03/2013 - 11:16 | 3403389 SheepDog-One
SheepDog-One's picture

Must....find charge interest.....on our....imaginary money...

Wed, 04/03/2013 - 11:04 | 3403302 kato
kato's picture

fannie mae and freddie mac (or whatever they/it are/is now) are right now lending to people who 'walked away' in 2008, people who could make payments, but decided to walk away. with Ben on one side and fanie/freddie and who knows who/what else on the other, is there no class of speculator that isn't getting government subsidized?

Wed, 04/03/2013 - 11:09 | 3403332 LawsofPhysics
LawsofPhysics's picture

"is there no class of speculator that isn't getting government subsidized?" - Define "speculator" , one can argue that, given the current monetization rate of the Fed, everyone using dollars is getting subsidized.  Turn those "debt notes" into physical (revenue generating if possible) assets ASAP.

Wed, 04/03/2013 - 11:17 | 3403305 ToNYC
ToNYC's picture

Morph the DEA into the CEA; fake Zirp Credit will Drug you downer than natural substances, and starve your savers into ineligible capital that was forced out of existence. Suffocate the savers and thrive with uncle Ben and the Feds: Capitalism FUBAR.

Wed, 04/03/2013 - 11:10 | 3403307 LawsofPhysics
LawsofPhysics's picture

Ah yes, how do you fix the problem of capital and resource mis-allocation and malinvestment and bad debt creation?  Why with the creation of moar bad debt and continued capital mis-allocation and mal-investment.  This should end well, I am starting to see some disruptions in supply lines, this should end well.  Of course there are those that still believe a "private" company dependent on a fat government contract is still somehow the "private" sector, LMFAO.

Wed, 04/03/2013 - 11:28 | 3403489 GeezerGeek
GeezerGeek's picture

There is no true private sector under the US version of fascism, unless you look to the black market.

Once the Feds decided they could force private enterprises to serve every customer that wanted service, the private sector suffered a hostile takeover. It probably goes back much farther than that. Fascist takeover of religion is under way: watch for religious institutions - at least the non-Islamic ones - to be force into providing homosexual marriage ceremonies, etc., just like they were forced into providing health care insurance that violated their religious beliefs. Time to scrap the Star Spangled Banner and replace it with something more fitting for the times. My nomination is "Mr. Blue" as performed by Clear Light ( It was originally written by Tom Paxton as a folk song ( I like the rock version better, as it's much more ominous; the folk version sounds almost jolly.   

Wed, 04/03/2013 - 11:06 | 3403319 TrumpXVI
TrumpXVI's picture

I guess it was stupid to ever think that maybe the shotgun was a Perazzi.

Wed, 04/03/2013 - 11:20 | 3403419 LeisureSmith
LeisureSmith's picture

From Wikipedia.. Vice President Dick Cheney was using a 28-gauge Perazzi shotgun when he accidentally shot his friend in 2006.

Wed, 04/03/2013 - 11:26 | 3403463 XitSam
XitSam's picture

Missed the part about Alabama, did you?

Wed, 04/03/2013 - 11:35 | 3403517 pods
pods's picture

I think there is a statute requiring ownership of a Mossberg in Alabama.


Wed, 04/03/2013 - 11:13 | 3403331 Agent P
Agent P's picture

If you trade in your shotgun for the down payment, does the car still come with a front passenger seat?

Wed, 04/03/2013 - 11:08 | 3403334 q99x2
q99x2's picture

I refuse to use student loans to buy a car. I'm waiting to get in on a house.

Wed, 04/03/2013 - 11:08 | 3403335 HelluvaEngineer
HelluvaEngineer's picture

Who the hell buys a Mossberg shotgun for $700?  Wait, must be the same dudes buying Norinco AKs for $1500.

Wed, 04/03/2013 - 11:13 | 3403374 TrumpXVI
TrumpXVI's picture

Yeah, really.

The most expensive one on GunBroker right now is less than $650.

Wed, 04/03/2013 - 11:36 | 3403520 pods
pods's picture

Just gotta put "tactical" in the name and tack on a couple hundred.


Wed, 04/03/2013 - 11:26 | 3403448 Agent P
Agent P's picture

MSRP on a Silver Reserve II is $693...but to answer your question, no one pays that much.  However, if you're willing to pay/finance $11k+ for a 2007 Suzuki Grand Vitara, I guess you can get full value on the trade.  What a country!

Wed, 04/03/2013 - 11:26 | 3403464 otto skorzeny
otto skorzeny's picture

"If you come to finance bring a shotgun"- House of Pain

Wed, 04/03/2013 - 11:08 | 3403337 SheepDog-One
SheepDog-One's picture

PARTY like it's 2007! FREE MONEYS...EZ CREDIT...nothing to worry about this time it's different!

Wed, 04/03/2013 - 11:09 | 3403342 LeisureSmith
LeisureSmith's picture

Tripple A all the way.

Wed, 04/03/2013 - 11:10 | 3403343 JohnG
JohnG's picture

Bullish Repo Men.

Wed, 04/03/2013 - 11:11 | 3403347 DeadFred
DeadFred's picture

Someone wants a loan and brings a shotgun with them when they ask, the proper answer is "sure thing".

Wed, 04/03/2013 - 11:16 | 3403398 Wakanda
Wakanda's picture

Awesome piano on that CK classic.

Wed, 04/03/2013 - 13:41 | 3404201 General Decline
General Decline's picture

Can't view the youtube video here at work, but I hope its the Rowdy Roddy Piper clip from "They Live"

Wed, 04/03/2013 - 11:10 | 3403348 buzzsaw99
buzzsaw99's picture

An investor might eke out 3% returns after losses on these but imo it isn't worth the headache for a few lousy bps.

Wed, 04/03/2013 - 11:10 | 3403354 marcusfenix
marcusfenix's picture

he probably should have held on to the shotgun...

Wed, 04/03/2013 - 11:12 | 3403356 Snoopy the Economist
Snoopy the Economist's picture

People who can't afford the loan to begin with don't care about interest rates - they have no intention of paying it back. So you and I will pay for it...again.


When will this stupidity end?

Wed, 04/03/2013 - 11:11 | 3403357 mattdubz86
mattdubz86's picture


Wed, 04/03/2013 - 11:14 | 3403362 Mercury
Mercury's picture

Seriously, CRMT has had a nice run this year and is up ridiculous since '09.

These guys are leg-breakers.

Wed, 04/03/2013 - 11:11 | 3403364's picture

Fool me 1,126 times is shame on who?

Wed, 04/03/2013 - 11:12 | 3403370 NoDebt
NoDebt's picture

I wonder how much this bailout is going to cost me.

Wed, 04/03/2013 - 11:13 | 3403379 buzzsaw99
buzzsaw99's picture

(Thomas's bankruptcy court filing lists personal property of $25 in a checking account, $1,000 in household goods and $300 in clothing)...

So he has nothing of any value. I wonder how much Thomas has paid in fees and penalties to the bank over the years to keep his $25 safe?

Wed, 04/03/2013 - 11:18 | 3403399 SheepDog-One
SheepDog-One's picture

The funny part is Thomas's $25 is more real wealth than most countries today.

Wed, 04/03/2013 - 11:18 | 3403418 otto skorzeny
otto skorzeny's picture

including the US of Fuckin' A

Wed, 04/03/2013 - 11:15 | 3403380 otto skorzeny
otto skorzeny's picture

let me guess- all of these fuckers are obese and get govt handouts-47%  bitchez

Wed, 04/03/2013 - 11:17 | 3403406 Iconoclast
Iconoclast's picture

Sheople cant wait, they can't save, they have to have. I read a report a while back suggesting that the majority of iPhone buyers in the UK had larger than the average outstanding credit commitments. 

Wed, 04/03/2013 - 11:19 | 3403409 Glass Seagull
Glass Seagull's picture



Once a person files for personal bankruptcy in the US, the chances that they do it again are slim...yet they have to pay subprime rates to get credit.


The perfect candidate.

Wed, 04/03/2013 - 11:24 | 3403455 spinone
spinone's picture

After WWII banks grew respectably by matching savers with those wanting to borrow money to create factories and companies.  This was good growth.

In the 70's and 80's this kind of economic growth slowed down int he US, but banks continued to grow.  They lobbied for deregulation, because their old business model didn't work.  They invested in other counties soverign bonds, and used emerging computer technology to develop "risk models".  Models that Taleb says are fatally flawed.  They had to be bailed out from those investments.

But banks continued to grow, and next invested in land scams (Silverado and the S&L scandal, involving the Bush family), the tech bubble, and now the housing bubble. 

Bernanke didn't start the fire.  The hold of the finance industry over politicians and regulators is the problem.  The finance industry's growth since the 80's has been aided and abetted by lax regulation and regulatory capture.  Without this is tould have shrunk to a suitable size.

The finance industry has to be allowed to shrink.

Wed, 04/03/2013 - 11:25 | 3403460 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

They are getting ready to blow that subprime bubble up even bigger than the last time around and it is not just auto loans.

Obama administration pushes banks to make home loans to people with weaker credit


The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.

Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars.

“If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.

Wed, 04/03/2013 - 11:31 | 3403491 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Here is the jist of the push

..One reason, according to policymakers, is that as young people move out of their parents’ homes and start their own households, they will be forced to rent rather than buy, meaning less construction and housing activity. Given housing’s role in building up a family’s wealth, that could have long-lasting consequences.

“I think the ability of newly formed households, which are more likely to have lower incomes or weaker credit scores, to access the mortgage market will make a big difference in the shape of the recovery,” Duke said last month. “Economic improvement will cause household formation to increase, but if credit is hard to get, these will be rental rather than owner-occupied households.”..


..The FHA historically has been dedicated to making homeownership affordable for people of moderate means. Under FHA terms, a borrower can get a home loan with a credit score as low as 500 or a down payment as small as 3.5 percent. If borrowers with FHA loans default on their payments, taxpayers are on the line — a guarantee that should provide confidence to banks to lend.

But banks are largely rejecting the lower end of the scale, and the average credit score on FHA loans has stood at about 700. After years of intensifying investigations into wrongdoing in mortgage lending, banks are concerned that they will be held responsible if borrowers cannot pay. Under some circumstances, the FHA can retract its insurance or take other legal action to penalize banks when loans default.

“The financial risk of just one mistake has just become so high that lenders are playing it very, very safe, and many qualified borrowers are paying the price,” said David Stevens, Obama’s former FHA commissioner and now the chief executive of the Mortgage Bankers Association.

The FHA, in coordination with the White House, is working to develop new policies to make clear to banks that they will not lose their guarantees or face other legal action if loans that conform to the program’s standards later default. Officials hope the FHA’s actions will then spur Fannie and Freddie to do the same.

The effort requires sign-on by the Justice Department and the inspector general of Department of Housing and Urban Development, agencies that investigate wrongdoing in mortgage lending...


Subsidized loans for these same kids that they loaded up on student loans who are defaulting on them so we the taxpayers have to foot the bill now will have to foot the bill for the "housing recovery". They can't get jobs using those useless degrees so now let's give them subprime loans with easy access to default on next and be able to stick it on the taxpayers back suckers.

Wed, 04/03/2013 - 11:51 | 3403592 GeezerGeek
GeezerGeek's picture

Since the first subprime crisis failed to completely destroy America, a second wave of destruction is needed. Those pushing this policy can't be so dumb as to think that this time will be different, therefore I attribute the impulse to malice.

Wed, 04/03/2013 - 11:26 | 3403467 QQQBall
QQQBall's picture

Just waiting for my deposits, errrrr bank investments to be confiscated to bail out the banksters -



Wed, 04/03/2013 - 11:28 | 3403481 kito
kito's picture

good news folks.....our government owned housing market is pulling in record profits for the politburo!!!!!

Wed, 04/03/2013 - 11:28 | 3403488 Headbanger
Headbanger's picture

There should be a line added now to NCIS Form 4473 asking

"We're you ever stupid enough to trade a shotgun as a down payment for a car

you could not afford??"


Wed, 04/03/2013 - 11:32 | 3403504 Mototard at Large
Mototard at Large's picture

President Obama’s science czar John Holden was an advocate of baby credits to control global cooling before he advocated carbon credits to control global warming.  You cannot make this stuff up.

Wed, 04/03/2013 - 11:32 | 3403506 MrBoompi
MrBoompi's picture

Lending money to people who probably won't be able to pay it back.  What could possibly go wrong with that?

Wed, 04/03/2013 - 11:36 | 3403526 Thinking Bulldog
Thinking Bulldog's picture

Whew! Those boys at Fitch are really raising hell about this aren't they? When the default rate hits 60% I'm sure they'll appoint a committee to study the matter of putting them on a watch list.

Wed, 04/03/2013 - 11:44 | 3403551 marcusfenix
marcusfenix's picture

this is exactly the problem with the American mindset these days.

the man trades a high quality, extremely useful, multipurpose tool for an over priced status symbol and a poor one at that. one that he never really had any hope of holding on to from the start.


couldn't he have saved a bit, and "settled" for a beater? maybe not quite as fun to tool around in but the bank would not have been able to take it back had he paid for it outright. in which case, he would have hit the hat trick, transportation, no black hand of death car loan and, most importantly, he would still have his shotgun.

what am I missing here?



Wed, 04/03/2013 - 12:07 | 3403682 writingsonthewall
writingsonthewall's picture

"what am I missing here?"

America is totally dependent on consumption and these 'learned' traits are very difficult to get rid of.


I have visions of the future - empty ghost malls with people still going to them out of habit - even though there is nothing left to buy.

Wed, 04/03/2013 - 11:45 | 3403555 yogibear
yogibear's picture

Borrow all you can and transfer the money to non-dollars.

Then default. Last chance to play the Fed's Ponzi game.

When the US dollar crashes you'll be holding something of value.

Those from Mexico/south America buy the most expensive, ship it iverseas, re-title, claim it was stolen, then collect and get out of the US and take the replacement with.

It's Federal Reserve fraud party time. 

Full ahead on borrowing scheme and scams!!!! The banksters want loans, give it to them, make their money disappear!




Wed, 04/03/2013 - 12:04 | 3403673 writingsonthewall
writingsonthewall's picture

^^ Do this - unlike in Europe you can walk away from your debts in America.


Want revenge on the banksters - borrow everything they are prepared to lend and buy hard assets or foreign currencies (or a nice mixture of both)

Crash the system - properly this time - as we can all see it's coming and have time to prepare.

There will be no sweeter sound than the wailing of a billion bonuses disappearing into the night as the banksters realise they were the mark this time

Wed, 04/03/2013 - 11:46 | 3403563 wcvarones
wcvarones's picture

Bad trade.

Wed, 04/03/2013 - 11:53 | 3403602 wcvarones
wcvarones's picture

I just bought a used car and the bastidjes gave me a 0-down loan without even asking for a down payment.  5 years, 3.5% interest.

I hope the dirty banksters paid a premium for the loan because I'm going to pay it off immediately.

Wed, 04/03/2013 - 12:01 | 3403635 Thinking Bulldog
Thinking Bulldog's picture

I did the same thing with Skank of America last summer.  100% financed, 3.25% 60 months.  On a used car.  That I had already bought and paid for with cash a week earlier.

Wed, 04/03/2013 - 11:59 | 3403631 writingsonthewall
writingsonthewall's picture

investors have proved increasingly willing to put their money into subprime auto debt for lower relative returns.

Not true - most investors don't have a clue where their money is being invested- they hand it to a 'money manager' and trust him to do the rest.

The fundamental tennant of a free market is rational consumers with knowledge of the market. This is why the free market never works - the world is full of liars and liar loans.

This will continue until it pops - then everyone will act 'surprised'.

You can't even blame the borrowers - they were told they would never get credit again after 2008 - so who is going to pass up an offer like this one?

Wed, 04/03/2013 - 12:01 | 3403646 syntaxterror
syntaxterror's picture

David Stockman, in his NY Times oped, claimed that after the next train wreck, there won't be any bailouts. This was the only point I disagreeded with. Those motherfuckers will always get a bailout. ALWAYS.

"Thanks to the Fed's ZIRP, the investing world is on a constant reach for yield; and due to the fact that the last bubble of investor largesse (ignoring leverage and reality) was not 'punished' but in fact 'bailed-out', participants in the financial markets learned nothing."

Wed, 04/03/2013 - 12:05 | 3403677 larryj
larryj's picture

This is just the governments new porgram to confiscate our guns. ha

Wed, 04/03/2013 - 12:14 | 3403725 Debt Slave
Debt Slave's picture

Well we bees movin on up, to a deeeee-lux McMansion in the sky hi hi...

Wed, 04/03/2013 - 12:31 | 3403790 OneTinSoldier66
OneTinSoldier66's picture

I'm still waiting for an article that clearly explains why Eric Holder can get away with coming out and saying, yep bankers are too big to fail and too big to jail. So we'll just keep propping them up!


Of course I realize, such an article would probably be about as clear as mud. That's what all these articles regarding what's going on in the economy are all about already! A phoney, fake economy that's about as clear as mud.


Perhaps we should all just become our own central bank. If we all just become our own king, then we can all look in the mirror and say to ourself... it's good to be the king! I'm not advocating doing away with all hierarchies everywhere, there will always be someone I have to answer to, but no one should have to support counterfeiters. It boggles my mind to see someone willing to sign up for a loan at a 22 percent interest rate, while at the same time the medium of exchange the loan is based upon is being printed up out of thin air.

Wed, 04/03/2013 - 12:43 | 3403872 Problem Is
Problem Is's picture

"It seems we truly never learn."

Oh, We Learned

  1. That if we could sell $$Trillions in fraudulent securtized garbage...
  2. Take home $$Billions in bonuses...
  3. And nobody raised a fuss, just passed on the losses to mutual and pension funds....
  4. And every AG, regulatory agency, career politician and teleprompter reading hack took their bribes and kept looking forward instead of back...
  5. And nobody on Wall Street from Lloyd & Jamie to Lowly went to jail...
  6. And on top of all that we got massive Fed and Taxpayer bailouts...

Then they learned they can run the same scams out of the same playbook again and again with impunity...

Wed, 04/03/2013 - 13:30 | 3404142 ILikeBoats
ILikeBoats's picture

The dealer made a couple of grand on it.  $11K for a crappy 4 year old vehicle with poor gas mileage and list price of about $20K, poor resale value.  The banks aren't as smart as we think, it is just that they get money for free and can thus gamble as much as they want.

Fri, 04/05/2013 - 16:02 | 3414007 HondaFullOfSilver
HondaFullOfSilver's picture

Exactly.  The car was a POS.  It was never worth 11k to begin with. The guy wanted/needed a car and there was some bank willing to finance him with some minimal bartered downpayment.  I wouldn't have done it, but then again - things are different when it's MY money.  This buyer wasn't someone with a lot of options..  He wasn't too bright either..  None of this is the fault of the Fed or the dealer.  We let people buy alcohol, even though maybe they shouldn't drink it.

All that mattered to him was his monthly payment and he got it...


Wed, 04/03/2013 - 13:39 | 3404194 khakuda
khakuda's picture

NINJA car loans, the latest achievement of Central Banking!

Wed, 04/03/2013 - 16:00 | 3404205 DaveA
DaveA's picture

Imagine for a moment that you're one of the Marxists running this country.

We don't give poor people subprime loans to buy food, rent an apartment, or see a doctor -- we just give them money, via EBT cards, Section 8, and Medicaid respectively.  Why not give them money to buy cars and gasoline? Don't people need cars to get to the store to spend their EBT?

I suppose Marxists prefer public transportation as both a means of controlling the hoi polloi and a source of patronage jobs.  That may change as deepening poverty deprives rural and suburban voters of their cars.

Wed, 04/03/2013 - 13:49 | 3404231 ToNYC
ToNYC's picture

The Moai of Rapa Nui were once Collateral too.

Wed, 04/03/2013 - 13:50 | 3404248 aerojet
aerojet's picture

What kind of fucking rocket scientist was this guy who took a car loan at over 20%?  That's fucking insane!  You might better pick up a junkyard car with a salvage title for $500 drive that around than to intentionally put yourself into bankruptcy.

Wed, 04/03/2013 - 14:32 | 3404487 Offthebeach
Offthebeach's picture

Hey, subprime auto got me into my van down by the river, my new home. Plus since its unregistered, they cannot find it to repo. Sweet!
Thankyou Uncle Ben!

Wed, 04/03/2013 - 14:43 | 3404550 moneybots
moneybots's picture

When is Lizard Lick Towing going IPO?

Wed, 04/03/2013 - 14:49 | 3404589 NoTTD
NoTTD's picture

I suspect the agencies now sounding the "muted" warnings are the same ones dishing out the AAA ratings to this crap.

Wed, 04/03/2013 - 15:22 | 3404757 robertocarlos
robertocarlos's picture

I had trouble getting a loan for a used car even though I had the money tied up in long term savings. The bank said it was to save me from myself. The bank was right even though I managed to buy the car through other means. cough lease cough. 

Wed, 04/03/2013 - 20:46 | 3406309 StychoKiller
StychoKiller's picture

"Down to the jewelry store packin' a gun,

'Wrap it up I think I'll take this one.'

'A thousand dollas pleeze,' the jewlery man said.

Dupree said:  'I'll pay this one off to you in lead!'"

-- Dupree's Diamond Blues, Grateful Dead

Thu, 04/04/2013 - 12:13 | 3408380 mercenaryomics
mercenaryomics's picture

I'd like to take this opportunity to introduce Mercenaryomics Financial's newest financial product the "FBS" or firearm-backed security. The FBS is an excellent and [nearly] risk-free opportunity to capitalize on the subprime market of collateralized arms.  FBSs when compiled into CAOs, our collateralized-armament-obligations and insured with the appropriate safety (pun) provided by our variant on the traditional CDS, the BCP, which is our bullet-credit-provision. Upon the incidence of default by the debtor, we provide you the creditor with (leased) access to the underlying instruments of the FBS, CAO and BCP, here being the "guns" and "bullets" respectively, with which you may now go collect monies owed you from your delinquent debtors. Get yours today! 

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