WHO COULD HAVE PREDICTED?

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Posted on 16th May 2013 by Administrator in Economy |Politics |Social Issues

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I wrote an article eight months ago called Subprime Auto Nation http://www.theburningplatform.com/?p=40182.

I went out on a limb and speculated that if you loan money to deadbeats who have no means to pay you back there is a high likelihood that the loan might go bad. In a truly shocking development it appears the loans doled out by the US government through their subprime loan specialists at Ally Financial are going bad rapidly. When 50% of all the auto loans in the country are made to subprime borrowing deadbeats, what could possibly go wrong?

Auto sales have been juiced by the easy credit being doled out. Sales are up 10% this year. The only thing rising faster are delinquencies and auto repossessions. Can you blame the deadbeats? They get to tool around in a Cadillac Escalade or Mercedes SUV for at least a year without making payments before the repo man appears. Their credit can’t be ruined because it already was ruined.

This is the Federal Reserve/Wall Street/Obama economic recovery plan. And guess who is paying the bill for the current and future auto loan losses? I bet you know.   

Subprime 2.0 – Auto Loan Deliquency Balances Rise 24% YoY

 
Tyler Durden's picture

Submitted by Tyler Durden on 05/15/2013 15:16 -0400

As we warned six weeks ago, the Fed’s ZIRP side-effects have driven auto-lenders to scrape the bottom of the subprime-lending barrel once again (loans to subprime borrowers +18% YoY). It seems, based on the Fed’s latest data, that this over-exuberant lending is coming back to bite once again as delinquent balances surge 23.9% year-over-year (though optimistically Experian reflects “obviously, we never want to see a rise in delinquencies or repossessions, but… they are still lower than the recession-level rates,”). As Experian also notes today, repossessions rose 16.9% year-over-year. All this as lending volumes overall rose 9.6% to $726 billion in Q1 2013 but average charge-off amounts rose by 9.8% to $7,401 on each defaulted loan – and the worse is yet to come, as “we continue to move forward, we should start to see more increases as some of the subprime loans coming onto the books begin to deteriorate.” This will end well.

 

CONSUMER DEBT REACHES NEW ALL-TIME HIGH

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Posted on 9th July 2012 by Administrator in Economy |Politics |Social Issues

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The Federal Reserve reported consumer credit outstanding as of the end of May. Great news. Consumers added $17.1 billion of new debt to their balance sheets and now owe a record $2.573 Trillion. Whatever happened to that deleveraging storyline being pushed by the MSM? It was a load of crap from the get go. Here is the link to the Fed report:

http://www.federalreserve.gov/releases/G19/current/

Here are my observations:

  • It seems non-revolving credit for autos and student loans jumped $9.1 billion in one month. It seems 70% of this increase was directly from the Federal government, meaning YOU made the loans to subprime students and subprime auto buyers in West Philly. Based on my observations, they are leaning towards Cadillac Escalades with your money. When the student loan bubble and subprime auto loan bubble burst you’ll be on the hook – AGAIN.
  • The really interesting data point was credit card debt surging by $8 billion to the highest level since 2010. This debt is 70% attributable to the Wall Street criminal cabal. Something doesn’t really add up. Gasoline prices were plunging in May. The consumer should have had more disposable income. But we know for a fact that retail sales sucked in May and June. So, why would credit card debt surge? Here is why:

 

      • 1.2 million people have fallen off the 99 week unemployment rolls and are now trying to survive on their credit cards.
      • The few jobs that have been added are part-time crap jobs with no benefits and people are using credit cards to try and make up the lost income.
      • The 8 million people that have “voluntarily” left the workforce may have left too soon and are enjoying their leisure time on their credit cards.

We have entered a recession, food prices are rising, real wages are dropping, and job losses are mounting. Surging credit card, student loan, and auto loan debt at the outset of recession is surely a good sign. The Wall Street banks sure look smart having reduced their loan loss reserves for the last two years. No bad debt on the horizon – right Jaime?

 

TARP LOSSES WILL GROW

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Posted on 25th April 2012 by Administrator in Economy |Politics |Social Issues

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When you hear blather about TARP being a huge success, turn your bullshit meter on. It has cost you over $100 billion so far and one look at this chart reveals that the propaganda spewed about a banking recovery is false. TARP was designed to save Hank Paulson’s cronies at the biggest Wall Street banks. It worked to perfection. The Too Big To Fail banks are 30% bigger and the executives are reaping billions in bonuses. Anyone who tells you that TARP saved America is a fucking liar.

WHY ISN’T THE MSM REPORTING FANNIE MAE’S $16.9 BILLION LOSS TODAY?

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Posted on 29th February 2012 by Administrator in Economy |Politics |Social Issues

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Amazing how this press release could completely slip by Bloomberg and Marketwatch. I guess Fannie Mae, which along with Freddie Mac and the FHA guarantee 95% of all the mortgages in the United States, isn’t really news worthy. It couldn’t be that our corporate MSM buries all bad news while touting every piece of good news. It seems Fannie Mae lost $16.9 billion more of your money in 2011. You own 80% of Fannie Mae, 80% of Freddie Mac and 100% of the FHA. Freddie will announce a massive loss tomorrow which won’t be covered by the MSM. The FHA is already bankrupt. Since 2008, Fannie and Freddie have lost over $200 billion of your tax dollars. But don’t worry, with the beauty of Federal Government accounting, these losses do not show up in the National Debt figures. Home prices hit a new low yesterday and they continue to fall. Fannie and Freddie are being forced to guarantee more mortgages given to deadbeats. Obama is using them for his new bullshit save the housing market schemes. By the time these fine well run organizations are finished, they will lose you another $200 to $400 billion.

The Bank Bailout’s Ugly Stepsister: Fannie Mae Still Losing Billions

The financial sector has had a tough slog in recent years, but the billions of dollars in losses that played out during and after the 2008 crisis have largely passed. That is, of course, except for Fannie Mae and Freddie Mac.

The mortgage finance giants have taken on a greater share of supporting the U.S. housing market as private players pared back their exposure in recent years, and the result has been billions of losses on the taxpayer dime. Fannie Mae reported the latest of those Wednesday, booking a $16.9 billion 2011 loss capped off by the loss of $2.4 billion in the fourth quarter.
 
“While economic factors such as falling home prices and high unemployment produced strong headwinds for our business again in 2011, we continued to grow a very strong new book of business as we have since 2009, “said CEO Michael Williams, who resigned in January but remains on board while the government-sponsored enterprise (GSE) looks for his replacement.Fannie Mae’s losses are still coming largely from legacy book of business (from before 2009), which led to $5.5 billion in credit-related expenses tied to declining home prices. (See “Case-Shiller: U.S. Home Prices Wrapped Up 2011 At Fresh Lows.”)
 
Business the company has booked since 2009, when lending standards got tighter and the excesses of the housing bubble were firmly in the rearview mirror, are starting to account for more of the firm’s net revenues but still not nearly enough to make the enterprise profitable.Part of the reason for that is the government’s ongoing support of Fannie Mae and sister firm Freddie Mac, which comes at a price.
 
When the Treasury Department under Hank Paulson opted to put the pair into conservatorship in 2008, it took a preferred stake in the two entities. During the fourth quarter Fannie Mae paid $2.6 billion in preferred stock dividends to the Treasury. That left Fannie with a net worth deficit of $4.6 billion as of year-end, and led the firm to request another infusion from the Treasury to eliminate it. Freddie Mac has not yet released fourth-quarter results, but had a $6 billion net worth deficit at the end of September it asked the Treasury to fill.The black holes of Fannie and Freddie – Fannie’s Q4 report shows it has requested to draw $116.2 billion since being placed under conservatorship Sept. 6, 2008 while paying back $19.9 billion in preferred stock dividends – are the biggest black eyes of the 2008 bailouts.
 
Plenty of critics of the Troubled Asset Relief Program have made their voices heard over the years, but at least most of the banks that received TARP injections – the biggest of which went to Bank of America and Citigroup – have paid back the government’s loans and are back to making profits, if modest ones. Even American Intl Group and the automakers  that received bailouts – General Motors and Chrysler – have moved beyond needing additional government dollars.
 
Fannie and Freddie, on the other hand, show few signs of becoming anything resembling productive companies until the housing market turns around or the pre-2009 assets are completely wiped off the books or new policies are necessary to encourage new refinancing beyond those currently in place that have had limited impact.