Former FDIC Head Sheila Bair Resigns From Parent Of World's Largest Subprime Auto Lender

Just days after Blythe Masters took up her role as Chairman of Santander Consumer - the world's largest subprime auto lenders; former FDIC head Sheila Bair has resigned her position on the board of Banco Santander citing excess "travel" as a reason. One cannot help but wonder if the clash of the titans was too much, if the embrassment of a failed stress test was unbearable, or if Ms. Bair sees the rapidly approach light at the end of the tunnel of subprime lending for what it is... a bigger train that 2008's.

As The FT reports,

Ms Bair wrote in a letter to the Systemic Risk Council, a regulatory advocacy group, whose chairmanship she is also giving up:

Though I have very much enjoyed my service on the board of this historic banking institution, the frequent trips to Spain are time-consuming and, I fear, would interfere with my responsibilities to the college.

The departure is expected to be announced by Santander as soon as Friday and becomes effective at the end of the third quarter, according to people familiar with the matter. Santander declined to comment.

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One wonders why - apart from her travel excuse...

Blythe Masters taking over a sub...?


For those unfamiliar with Santander Consumer, they are the lender who, as of Q4 2014, had $15 billion in oustanding subprime auto loans on the books. Here’s a peek into the company's recent trials and travails:

Santander Consumer — a unit of one of only two banks to receive the dubious honor of failing the Fed’s stress tests yesterday and the market leader in subprime auto lending — allegedly ignored a law that requires lenders to obtain a court order before repossessing cars from members of the military and will now pay $9.35 million to settle the issue with the government. Apparently, Santander illegally repoed nearly 800 vehicles from active service members over the course of 5 years and then attempted to extract fees from some 350 additional soldiers in connection with repossessions the bank didn’t even execute.


This is the same Santander Consumer that was subpoenaed last year by the Justice Department in connection with its packaging of subprime auto loans into ABS and whose lending practices also got the attention of the New York Dept. of Consumer Affairs.


Don’t think for a second that any of this is slowing down the Santander Consumer subprime auto securitization machine though. The company, which leads all other lenders when it comes to the total amount of subprime auto loan debt outstanding, has already done a deal this year worth $1.2 billion which accounts for nearly 25% of all subprime auto ABS issuance YTD.



Failed Stress Test?

 The CCAR results are now out and 28 of 31 passed. Deutsche Bank, Santander failed for "qualitative" reasons (with significant and widespreasd deficiencies in risk management) and Bank of America will need to resubmit their proposal.




It's the second year in a row that Santander Holdings, a unit Santander Group of Spain, has flunked the second phase of the Fed's stress test

Or fears of an oncoming collapse in subprime auto lending...

Here are 60-day delinquency rates by vintage, which pretty clearly show that most of these issues have a date with double-digits sooner or later…

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We are sure we will find out soon when a) Blythe is moved up to Banco's board; and/or b) Subprime lending collapses again.