No More Car Loans

More on the credit crunch:

The era of easy auto loans has come skidding to a halt.

Mortgages were among the first consumer products to be hit by the credit-market freeze. Now car loans and leases are drying up as dealers, auto-finance companies and other lenders are having trouble finding money to lend to car buyers. The upshot: Those with less-than-stellar credit are getting shut out of loans, and even some so-called prime borrowers are having trouble getting financing.

"You have to just about be walking on water to get financed," says Mike Jackson, chief executive of AutoNation Inc., the largest U.S. chain of dealerships. He added that the subprime market is "basically almost closed" but "even with our prime customers, banks are looking for a reason to say no."

The rest of the story is here.  A car industry insider reported to me that most dealerships are not giving anyone a car loan over $30,000.  Today they turned down someone with a 780 credit score and mid-six figure income who requested a $30,000+ loan.

Things are much worse than the "experts" are reporting.  There is a lot abstract talk about a "depression."  Few are explaining what that means.

It means that people with any job at all should consider themselves lucky.  Our society is already full of freeloaders and welfare recipients.  Now, people who actually want to work won't be able to find jobs.  They won't be allowed to live on credit cards anymore, either.

What happens when people have no jobs, no savings, and no credit cards?  What happens when the car you need to drive to work breaks down for good, and you can't get a loan for even a used card?

The questions to start asking are: Why are we here?  We are here because of Democrats and because of people like Henry Paulson.  Yet what is our solution?  We are entrusting our future to those same people.  Henry Paulson is Secretary of the Treasury and Barack Obama will soon be our President.

We are heading towards Great Depression II, and quite frankly, I have little sympathy.  We as a society are getting the government we deserve.

Apathy has finally led to catastrophe.

Comments

[Mahan Atma]

"We are here because of Democrats and because of people like Henry Paulson."

Excuse me? We're here because of Democrats??

Look, nobody's arguing that the Democrats are free of all blame, but your statement as phrased is wildly unbalanced.

Mike, if you did comprehensive and objective research of the situation, you'd see that your analysis of the causes of the present crisis have been way off the mark. Blaming the whole thing on Fannie/Freddie and the CRA is demonstrably wrong.

Look at the numbers. The majority of bad loans were made by private institutions that were NOT doing so as a requirement of the CRA -- they did so because it was extremely profitable at the time.

You're repeating the talking points of proven hacks like Kevin Hassett (someone who said there was no housing bubble back in 2004). Please look into this in greater detail before repeating this nonsense.

[Mike]

I have absolutely said Wall Street was to blame. And George Bush. Repeatedly. I simply have concluded that the Democrats are *most* to blame.

Why? Because if Fannie and Freddie hadn't bought up subprime mortgages, there wouldn't have been anything for Wall Street to bundle. Who protected Fannie and Freddie, allowing them to run wild? The Democrats.

Also, I am not repeating anyone's talking points. I was all over this angle days before the MSN was. I got a hot tip about an old NY Times story, did some follow-up research, posted it, and then started seeing the mainstream press (or at least the conservative segments) talking up the issue.

[Mahan Atma]

"Because if Fannie and Freddie hadn't bought up subprime mortgages, there wouldn't have been anything for Wall Street to bundle."

That's simply not true, Mike. Barry Ritholtz has thoroughly debunked this claim (along with the bogus CRA theory):

http://bigpicture.typepad.com/comments/2008/10/misunderstandin.html

• 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by either CRA or GSEs ?

• What about "No Money Down" Mortgages (0% down payments) ? Were they required by the CRA? Fannie? Freddie?

• Explain the shift in Loan to value from 80% to 120%: What was it in the Act that changed this traditional lending requirement?

• Did any Federal legislation require real estate agents and mortgage writers to use the same corrupt appraisers again and again? How did they manage to always come in at exactly the purchase price, no matter what?

• Did the CRA require banks to develop automated underwriting (AU) systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?

• How exactly did legislation force Moody's, S&Ps and Fitch to rate junk paper as Triple AAA?

• What about piggy back loans? Were banks required by Congress to lend the first mortgage and do a HELOC for the down payment -- at the same time?

• Internal bank memos showed employees how to cheat the system to get poor mortgages prospects approved that shouldn't have been: Titled How to Get an "Iffy" loan approved at JPM Chase. (Was circulating that memo also a FNM/FRE/CRA requirement?)

• The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act ?

• Did the GSEs require banks to not check credit scores? Assets? Income?

• What was it about the CRA or GSEs that mandated fund managers load up on an investment product that was hard to value, thinly traded, and poorly understood

• What was it in the Act that forced banks to make "interest only" loans? Were "Neg Am loans" also part of the legislative requirements also?

• Consider this February 2003 speech by Countrywide CEO Angelo Mozlilo at the American Bankers National Real Estate Conference. He advocated zero down payment mortgages -- was that a CRA requirement too, or just a grab for more market share, and bad banking?

The answer to all of the above questions is no, none, and nothing at all.