Subprime car-loan borrowing:
"Those with non-prime credit ratings—or credit scores between 620 and 679—had the highest average auto loan. For these borrowers, the average new car loan rose more than $1,500, to a new high of $29,385. Not surprisingly, those with subprime credit ratings—credit scores between 550 and 619—had the highest average monthly payment, of $499."
Subprime student-loan lending: "We've been taking whatever we can for student loans every year, taking whatever we have left over and using it to stock up the freezer just so we have a couple extra months where we don't have to worry about food," says Mr. Matherne, who owes $51,600 in federal loans.
Although the amount spent this way may be small, some estimates at $221M it's the malinvestment in a second rate education, a degree thats' not in demand, or simply failing to attend classes--those are the true losses that student loan borrowers will face.
last week banks ramped up subprime lending and now this week "Eight of the nation's largest banks will be able to use their own models and systems to calculate the amount of capital they need to set aside for risk- weighted assets, according to a source familiar with the situation."
MOAR Lending! Bring on the subprime aka "another chance mortgage"
The banks receiving approval for their models are JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley, Northern Trust, State Street, Bank of New York Mellon and U.S. Bancorp. The changes will take place in the second quarter.
The source said at least 10 other U.S. banks are in line to have their models approved, as the rule they are complying with applies to all U.S. banks with more than $250 billion in assets and a global presence. The other banks have not received approval yet as their models have not been running for the last two years.
The rule on how to model for capital was finalized in 2007, and in July 2013 regulators said at a minimum the banks would have to hold 7 percent Tier 1 capital, which primarily entails common stock and reserves. The source said that under the banks' own models, they will all hold more than the 7 percent minimum and that broadly speaking all eight banks have currently meet or exceed that level.
There is a coordinated effort to generate inflation. The FED has run out of ammunition to fight disinflation (many think this happened as soon as the FED funds rate hit .25% or 0%). An austerity obsessed Republican House has largely limited discretionary or non-automatic fiscal policy to affect inflation. As a credit bubble deflates in China and turmoil hits emerging markets, the possibility of another depression increases, with central banks without ammo and gridlocked governments.
We'll see in a few months how this plays out but it seems the US gov't via the US banking cartel is asking the US to borrow like it's 2007 to provide demand while the globe withers or crashes.
We must accelerate the race to the bottom or terminate it and/or have a painful reset.
There must be more faith in the value of labor and certainty in its future cash flow and a reduction in the value of hoarding or saving. Higher wages for those with higher marginal propensity to consume will drive demand and trading of real goods (vs financial assets, repurchasing shares, all under mark-to-fantasy accounting).
Saving represents consumption delayed and increasingly it seems there is a thing as too much saving, especially in individuals, groups, or institutions with a low propensity to consume/spend. In the great depression, you hear mostly about individuals causing a run on banks, in this economic environments institutions, UHNW individuals, corporations, and companies are hoarding and causing a run on labor demand which feeds into a vicious circle, reducing wages, reducing demand, and encouraging further hoarding, cost cutting, etc. The psychopathic fear of another global depression is leading inorexably towards that very thing. as with money, trade is based on trust and confidence, and as worldwide confidence in its institutions and a brighter tomorrow has faded, so as the willingness to trade and invest for the future.
the search for yield & malinvestment:
