Consumer Credit Jumps By Most In 10 Years On Surge In Car Loans

Tyler Durden's picture




 

What happens when consumer savings plunge to year lows, when a major shopping holiday is just around the corner, and when every TV station tells you to spend, spend, spend for Thanksgiving just to show your friends and family you care for them? Why people go out and buy on credit of course. Lots of credit. As the just released G.19, aka Consumer Credit, data from the Fed indicates, in November US households borrowed a 10 year high amount of $20.4 billion. Of course, reading between the lines confirms that all is as usual not as it seems, and not to conclude that the money multiplier model is back in action. Because of the $20 billion, only $5.6 billion was revolving credit, with the bulk in cheap Subprime loans funded by the government for purchases of GM vehicles and student loans. Granted even so the revolving credit jump was the biggest since February 2008, when deleveraging was the last thing on consumers' minds. So are consumers relevering again? And if so are they doing so because they are confident the economy is improving? We doubt it, and we are fairly confident December data will be quite different and will show a notable reversal when effecting for all the record merchandize returns following the early Thanksgiving retail splurge. Judging by the market's non-reaction to this news, it seems to agree. Because if it didn't it would also means that it is about time for the Fed to start tightening: and if there is one thing that would guarantee a 30% instantaneous correction it is the mere whisper that the Fed needs to withdraw some of its $1.7 trillion in excess liquidity out of the system.

Consumer credit: revolving and non-revolving.

Consumer credit by source:

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Mon, 01/09/2012 - 16:34 | 2047593 Gully Foyle
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Must be Volt sales

Mon, 01/09/2012 - 17:00 | 2047678 Midas touchmenot
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nice consumers consuming as opposed to obama.

Mon, 01/09/2012 - 17:03 | 2047690 trav7777
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yay!  more credit!!!!

Mon, 01/09/2012 - 17:13 | 2047720 Sudden Debt
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The repo man is going to be buzzzzzzzzzyyyyiaaaahh the comming months!

Mon, 01/09/2012 - 17:47 | 2047822 Max Fischer
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Because of the $20 billion, only $5.6 billion was revolving credit, with the bulk in cheap Subprime loans funded by the government for purchases of GM vehicles and student loans.....

I respectfully disagree with this statement. 

First of all, just because GM was bailed out and then purchased AmeriCredit does not mean that the US government funds consumer purchases through GM - that's a gigantic leap.  Using this flawed logic, you must also say that Eric Sprott was bailed out by the US government since he used HSBC to help underwrite PSLV, and HSBC benefited by over $3B through the backdoor AIG bailout.  In both instances, the dots are close by, but not connectable.  

Second, there is no proof provided that the "bulk" of credit was "cheap subprime loans funded by the government."  Only the smallest percentage of car sales nationwide are funded through AmeriCredit.

Thrid, if someone would do some forensics on AmeriCredit's portfolio, you'd find that the vast majority of their portfolio is NOT GM.  They fund for all manufacturers and most dealers in the United States.  Paper from GM is just a small fraction of their outstanding loans.

Fourth, some empirical data is necessary to prove that the majority of GM subprime paper is being sent to AmeriCredit.  In truth, it is not.  GM dealers send subprime paper to a wide variety of lenders.  In fact, GM dealers avoid AmeriCredit because they require Proof of Income on absolutely every deal. Many other lenders do not.

I'm not trying to be a jackass, but I think it's important if readers disagree with a post that they can make a respectful counterpoint.  I'll be the first to admit that I thoroughly enjoy this site, whether I agree with stuff or not.   

Max Fischer, Civis Mundi

Mon, 01/09/2012 - 21:48 | 2048410 Tijuana Donkey Show
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Well put. But...... WTF are they buying then with all that credit? Guns for Fast and Furious, drones, Guy Fawkes masks? I'm more worried that it isn't GM cars, because that means there are even more GM's just sitting around unsold. So, what are they buying?

Tue, 01/10/2012 - 02:10 | 2049306 AustriAnnie
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Yet, per the document, "Federal Government" amount held of nonrevolving is listed.  

The fact that the loan amounts are increasing and that the Federal gov't is the holder seems fairly straightforward.  I'm not sure the focus on Americredit? 

Also, I think that whether the loan went to a GM car or a useless degree or a vacation to Cancun doesn't make as much of a difference, given the state of the average American's ability-to-repay what was borrowed.  Given the various choices, one can only hope they chose the car over the useless degree or the vacation, since they can at least use the car to get to a job interview...

 

(*With nonrevolving definition as:

"Includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations. These loans may be

secured or unsecured.")

 

Mon, 01/09/2012 - 19:03 | 2047978 NumberNone
NumberNone's picture

Obama can now hold his extravagant parties in the open.  No need to hide when apparently none of us give a shit about debt!

http://www.telegraph.co.uk/news/worldnews/barackobama/9001133/White-House-covered-up-Tim-Burton-staged-Alice-in-Wonderland-Halloween-party.html 

Tue, 01/10/2012 - 00:46 | 2049103 TruthInSunshine
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I know a highly irresponsible 29 year old who just signed a 24 month lease on a Cadillac CTS with a MSRP of around 40k for nothing down (not even first month payment or security deposit due at signing) for $278 per month OTD (tax included).

He only had to pay a plate/tag transfer fee and tax on the rebates at signing, which amounted to under $400.

The reason I know this is I have him do some work from time to time out of loyalty that I owe to his cousin, who has been a great friend of mine.

The kicker is that this 29 year old's FICO score is less than 550. This, I shit you not.

 

The Bernank's got the joint jumpin', thumpin', pumpin'.

It will all end very badly.

Mon, 01/09/2012 - 20:32 | 2048230 Mareka
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If only there were a way to transfer the coming losses on piles of subprime auto loans to taxpayers then the criminals who wrote them could avoid taking any losses.

If only they could be rolled into marketable securities and sold to pension funds like subprime mortgages.

Wait!  It's already in the works. 

The Hagan Corker Covered Bond Bill allows for bundling of auto loans, credit card debt and student loans into marketable securities to be insured by... wait for it... The FDIC.

Once again our senators are thinking outside the box & only with your best interest in mind.

See the bill here.   http://www.hagan.senate.gov/files/111109_CoveredBond_BillText.pdf

Who gets to decide what can go into these bonds?  It is at the sole discetion of the Secretary of the Treasury.

Read it and weep. 

So far the FDIC is stating that it has some "concerns".  See where it goes.

 

Tue, 01/10/2012 - 08:02 | 2049649 Mareka
Mareka's picture

Morning Rant.

It makes me madder than hell that I've been over paying for everything for the last 30 years.

When I go to buy a car I am writing a $30K check to transfer savings out of a bank account but the price of the car is determined in a market where I am competing for all goods with anyone willing to scribble their name on a contract.  In this environment prices are driven by the lowest common denominator, the least educated & most irresponsible. 

Here is an example of how out of whack things are.  I know a man who's family is disposing of all of his assets so he can get decent health care.... Not to PAY for health care.  They need him to qualify as poor, < $2,000 total assets because if he has any wealth he is on his own.

The Bankstas have built the worlds most comprehensive wealth extraction machine ever devised and we have all been herded into the milking barn.

OK I feel a little better.

Mon, 01/09/2012 - 16:37 | 2047598 lizzy36
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Turns out the solution to, too much debt is more debt.

Which mean Larry Summers was right http://www.zerohedge.com/news/quote-week.

Mon, 01/09/2012 - 16:37 | 2047600 HoofHearted
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I just defaulted on the credit card that I used to pay the old car's car payments, so I didn't have enough debt to patriotically help the US in its economic problems. So I corrected this by taking out a subprime loan on a brand new GM car. Thank you, Uncle Sam.

Love, U.S. Taxpayer

Mon, 01/09/2012 - 16:48 | 2047631 Schmuck Raker
Schmuck Raker's picture

Hey, "you owe it to yourself."

And, you owe it to yourself.

Mon, 01/09/2012 - 21:57 | 2048433 Tijuana Donkey Show
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It's OK, we rolled the credit card, and loan on the old car into the new loan, is a 120 month car loan at 19.5%, which is good as long as you pay, and will just magically inflate itself away. Just sign and keep working and fighting you good little serf, and it's all going to be OK. We invested your pension in Chinese real estate, so we can't loose by just chasing gains. Goldman told us so, and if you can't trust your Sachs, what has the world come to?

Love, your Pedophile Uncle S(c)am

(He touched my PM's!)

Mon, 01/09/2012 - 16:40 | 2047610 docj
docj's picture

Drinking ourselves sober.

Yeah, this will end well.

Mon, 01/09/2012 - 16:41 | 2047612 vote_libertaria...
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Could the car sales bump be because of the business depreciation benefit that was ending 12/31?

Mon, 01/09/2012 - 16:55 | 2047658 Tortfeasor
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In my experience, people take out loans right before declaring bankruptcy.  Most common type?  

Auto loans. 

Mon, 01/09/2012 - 16:59 | 2047672 CClarity
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Prepare for car keys to be dropped off at dealers and banks again.  That went on aggressively before foreclosures on homes cascaded.

Mon, 01/09/2012 - 17:05 | 2047695 economics1996
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One last car before the bust.  

Mon, 01/09/2012 - 17:28 | 2047763 mayhem_korner
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...or a get-outta-Dodge vehicle.

Mon, 01/09/2012 - 21:59 | 2048439 Tijuana Donkey Show
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And the Budda said, "can you flee dodge in a Dodge?" 

Tue, 01/10/2012 - 02:23 | 2049331 AustriAnnie
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Cars don't exempt people from entitlement programs.  And since loans can be had even with bad credit, you can default on your house, then buy the car.  Or buy the car then default on your house.  Either way, you get away with it.

Also, some people took out home equity lines of credit, used it to buy cars, knowing full well in this environment, nobody would even blink when they later walk away from the house, er drive away from the house in their brand new SUV.

Mon, 01/09/2012 - 16:42 | 2047615 karzai_luver
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american consumers must buy  and best on credit , it's the american way and it will be either this or the country will be consumed in fire as the american drugged consumer will lash out if not allowed to consume consume consume.

SOLD to you bitchez!

 

 

 

Mon, 01/09/2012 - 16:53 | 2047640 orangedrinkandchips
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One of my favorite shows on tv is Pawn Stars...obviously a big hit with many....BUT...the fact that got me and it's an obvious one too is the reason for Pawn shops in general throughout history WAS BECAUSE WE HAD NO CREDIT CARDS BEFORE....IF YOU NEEDED CREDIT YOU GO PAWN SOMETHING.....That is how it was in the 1st depression.....

 

Thus the 3 ball symbol of Pawn shops....when people couldnt read how could you tell it's a pawn shop??? the 3 ball symbol.

And, literacy was not common back 100 years ago...GO TO ANCESTRY.COM or try to pull up a census from late 19th century....

 

1.) CAN YOU READ?

2.) CAN YOU WRITE?

Interesting as hell....you had two boxes on the top of the form that the person taking the information had to check...obviously it was a person taking the info since not many could read or write.....CHECK IT OUT...IT'S CRAZY. So interesting. I checked my families and they could read and write....but quite a few could not do either!!! But, that could mean English instead of any language too.....So many obviously were fresh off the boat so they could speak German or Spanish but not English...dunno....it could mean English and that would make sense....You know German but not English...??

 

seriously....intersting.

Mon, 01/09/2012 - 17:18 | 2047735 CvlDobd
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Strange. I can read and write yet I have no idea what you just tried to say.

Mon, 01/09/2012 - 19:05 | 2047981 MobBarley
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I think they just said that DO YOU HAVE ANOTHER ROCK?

 

Mon, 01/09/2012 - 17:19 | 2047737 trav7777
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credit with collateral...what a concept

Mon, 01/09/2012 - 22:01 | 2048445 Tijuana Donkey Show
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The original rehypothecation

Mon, 01/09/2012 - 22:06 | 2048457 JohnG
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It is interesting.  I've done quite a bit of genealogic research on my forebears, and this makes some of that hard.  People knew thier names, but not how to spell them.  So it was up to the census worker, on back to the ensign filling out the ships manifest to "guess" how to spell the name.

Then, it get's even worse if you go to say, Scotland in my case on one side, and start getting names in Gaelic.

Quite a puzzle to unravel.  I've managed to trace back to a guy in Scotland in 1346, but not past that.  It was seriously difficult and took hunting around in document rooms in ancient churches to get that far.

It's a little easier in England on the other side, but not much.  Spelling, that seems to be the key.

Mon, 01/09/2012 - 16:43 | 2047617 orangedrinkandchips
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"IT'S ALL ABOUT A SALARY AND NOT ABOUT REALITY...REALITY"...NWA

 

KEEPING UP WITH THE JONESES....(OR OBAMAS).....

Mon, 01/09/2012 - 16:49 | 2047638 Bolweevil
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Cash Credit Rules Everything Around Me

Mon, 01/09/2012 - 16:57 | 2047668 I Got Worms
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Bankstaz, bankstaz...

Mon, 01/09/2012 - 16:43 | 2047619 Lothar the Rott...
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Relax, it was just everyone charging their Thanksgiving turkeys and Christmas hams on the 'ole Visa/MC/Discover.

Mon, 01/09/2012 - 16:44 | 2047622 Snakeeyes
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Yup, we are addicted to debt. This is BAD news in that consumers didn't learn anything from the credit bubble and crash.

Mon, 01/09/2012 - 16:56 | 2047663 Irish66
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I take it you guys don't do the grocery shopping!  Everyone in line is either credit card or snap.

Women are trying to feed their families

Mon, 01/09/2012 - 17:35 | 2047778 ucsbcanuck
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I'm on credit card, but pay my bill at the end of every month. That way I get the points and don't have to carry a wad of cash around and don't pay ridiculous amounts of penalties

Mon, 01/09/2012 - 21:09 | 2048283 DosZap
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Snakeeyes

Bud, it's like this.......for  my entire adult life,every recession we have had that was over a year.

Americans will stop/slow discretionary spending to crawl.

After 18 months, they can no longer deprive themselves of that THING.No matter what it is, or if they really need it.

My money is on 85% of Americans have ZERO clue as to what is going on for real.

And, would not understand it if they did.

BORN to shop............is ingrained in every Americans psyche.

It has been this way since the late 70's. It's a cycle...................an addiction.

Mon, 01/09/2012 - 16:47 | 2047627 papaswamp
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So much for deleveraging....back to 2006-2007 we go. So I guess we will see an increase in defaults by April-May? Just in time for QE3 to be launched.

Mon, 01/09/2012 - 16:47 | 2047628 chump666
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well done obama.  you were able to credit flowing again.  problem is....so will the defaults.  now you bail out wall street again say prior to elections you might as well back your sh*t  up and move to Greece.  the voter backlash will be brutal.  and there is a very good chance once china crashes wall street will get decimated.  could happen in the next 6mths

Tue, 01/10/2012 - 01:09 | 2049167 StychoKiller
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Decimation (Latin: decimatio; decem = "ten") was a form of military discipline used by officers in the Roman Army to punish mutinous or cowardly soldiers. The word decimation is derived from Latin meaning "removal of a tenth".

Most people use decimation when they really mean:

Devastation - Bringing to ruin or desolation by violent actions.

Mon, 01/09/2012 - 16:48 | 2047632 Shizzmoney
Shizzmoney's picture

Dad bought his car on loan from TD bank.  He's a cop, so they obviously snap-called it in for him, but a few banks actually declined.

I'm probably one of the few PAYNG down debt.  I, unlike most of my Millenial friends, will be debt free and in the "Life Black" by the end of the year.

Mon, 01/09/2012 - 16:56 | 2047664 RichardENixon
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Well if you're a taxpayer, you will likely end up paying down your friends' debt as well.

Mon, 01/09/2012 - 17:09 | 2047711 pine_marten
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Not taking on any additional debt is also many peeps wish.  Don't reckon I'll ever finance another vehicle.

Mon, 01/09/2012 - 17:16 | 2047728 MachoMan
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Timing is a fool's errand.  Those planning on spending til they bust are making a timing decision.  If timed incorrectly, then there can be a lot of pain between here and the jubilee...  not that deleveraging will necessarily avoid anything, it just provides a little more buffer for future biflationary pressures.

Mon, 01/09/2012 - 19:21 | 2048028 lotsoffun
lotsoffun's picture

macho man - unfortunately - i'm afraid you are wrong.  they aren't making any decisions at all - they are doing as told - buying things they can't afford with money they don't have (for things they don't need).  there is no tomorrow for them.  and was there no past.  it's only to buy and have it today.  that's the power of advertising via TV.  now.  you want it now, have it now, take it now. 

what was the downside for any of these people?  tell me?  yesterday they had nothing, and today they have flat panels in every room.  and haven't and won't ever pay for it.

you and me - if you have a job, pay taxes and have savings will simply see all of that erode and disappear.

just the way it is.

 

Tue, 01/10/2012 - 11:12 | 2050118 MachoMan
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See post below for expansion.

Mon, 01/09/2012 - 16:48 | 2047634 fbrothers
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It appears the banks have started buying garbage loans again. Got to have another bailout from taxpayers. QE3 coming even if employment rate 4.5%.

Mon, 01/09/2012 - 16:48 | 2047635 non_anon
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just following the example of our Dear Leader

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