Obama administration pushes banks to make home loans to people with weaker credit

[progree]

88. I thought maybe this was Chicken Little stuff, then I read this -- Subprime auto loans explosion

Title: Special Report: How the Fed fueled an explosion in subprime auto loans, Reuters, April 3, 2013

The article focuses on the explosion in subprime auto loans, but there are other kinds of loans exploding in quantity and imploding in quality

Essentially what it says is that the Federal Reserve's quantitative easing programs and other policies "have injected trillions of dollars into the financial system" and resulted in lower interest rates (near zero at the short-term end), post-WW II lows at the intermediate and long term ends ...

So you have a lot of money and a lot of lenders chasing borrowers, including crummy borrowers ... and financial firms buying up these crummy loans and bundling them into securities and then you have investors of all kinds desperate for anything bearing a decent amount of interest buying these securities as fast as they can be put together ... (quoted excerpts shown in brown -- I'm keeping to the 4 paragraph limit)

[font color = brown]"with low interest rates pinching yields on their traditional investments, insurance companies, hedge funds and other institutional investors hunger for riskier, higher-yielding securities - bonds backed by subprime auto loans, for instance."

"Consider that in 2012, lenders sold $18.5 billion in securities backed by subprime auto loans, compared with $11.75 billion in 2011, ... The pace has continued so far this year, with $5.7 billion of the securities issued, compared with $4.4 billion for the same period last year, ...

"Critics of the Fed say the growth in subprime auto lending is just one of several mini-bubbles the bond-buying program has created across a range of assets - junk bonds, subprime mortgage securities, and others"[/font]

(And by the way the investors are so eager to get their hands on these that they are bidding the price of these toxic securities down to the point where their yields are sometimes below 2% -- do you feel good that your insurance company might be investing in this junk for as little as a 2% return?)

And the explosion of lending to less and less credit-worthy borrowers is resulting in ...

[font color = brown]"In 2011, Exeter Finance was listed as a creditor or participant in 252 bankruptcy proceedings, according to an online database of federal court filings. In 2012, the number increased to 1,144."[/font]

More: http://news.yahoo.com/special-report-fed-fueled-explosion-subprime-auto-loans-110501752.html

(You really have to read the article to get into most of the grime and the muck. The above is kind of the "executive overview&quot

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So yeah, it looks like we haven't learned a friggin thing from 2008. The sad thing is that I've long been a cheerleader for the recent economy (see my signature line for a lot of that). Now I'm not so sure.

"To err is human, but only a horse's ass makes the same mistake twice" - Admiral Rickover