Buy, Finance or Lease - the Car Conundrum

[Polish_Silver]

Public policy the root?

The flaw that I see in the dependence on legislation in place of "common sense" is that in addition to legislation to protect potential sub-prime borrowers, by extension there should also be legislation to protect all those pension fund managers, Norwegian village council members and German Landesbanke executives that also demonstrated no common sense by piling into derivative instruments of which they knew absolutely nothing. Clearly they were no more capable of sound decision making than their Central California minimum wage agriculture worker counterparts in this grand scheme :-)

There are public policy aspects that address even this:

1) interest rates were too low--causing people to become desperate in searching for yield.

2) Bond rating agencies had no "skin in the game". They should collect fees from bond buyers, not bond sellers. They also ought to lose thier license or be severly fined, if thier ratings turn out to be crap.

[thriftyandboringinohio]

Re: Who to blame

I blame all of them.

Borrowers, loan brokers, bank executives. The higher up they are, the more blame (and prosecution) they deserve.

There were people who could have, but did not, borrow money they could not pay.

There were appraisers who didn't "play along" and lost business because of it.

I even heard of banks that did not make mortgage loans during the bubble .

I leave the borrowers out of the blame.

If one is in the business of lending money, one must assume that crowds of people will come in to request loans they will never pay back. Lenders honestly earn a big part of the interest by working hard to turn away most of those unqualified borrowers, and by accepting the losses on the ones that get through despite these efforts.

While I'm sure some deadbeat borrowers are no better than thieves who knowingly cheat the bank, many others are somewhere on the spectrum of deluded dreamers and fools who think a miracle will help them make the payments.

Our problems today are not due to some sudden increase in deadbeats trying to get loans - those have always been abundant.
Our problems are due instead to a sudden increase in shady lenders making bad loans knowing they can either sell the loans to fools or get insurance to avoid the inevitable losses.

[ProdigyofZen]

Re: Autos, usury, Irrational customers

I suspect Blackstone's business model would need tweeking if they didn't have free access to your savings. Lending to losers works with free money.

Don, please don't call these people losers. Life boils down to two things really: circumstances and choices. I am sure that man in the story above had very little chance of changing his circumstances (as most people don't) but he does have control over his choices or so people think.

When you are born into bad circumstances you have a greater than 50% chance of doing what everyone around you does, make bad choices.

Just remember to try and treat everyone with empathy as they are fighting some battle that you do not know about.

[jk]

Re: Autos, usury, Irrational customers

remember the kids in school who had trouble with fractions and decimals? they all grew up.

[ProdigyofZen]

Re: Autos, usury, Irrational customers

remember the kids in school who had trouble with fractions and decimals? they all grew up.

Not being good at math does not equate to not being good at life or making the right choices.

[jk]

Re: Autos, usury, Irrational customers

Not being good at math does not equate to not being good at life or making the right choices.

yes, there's more to life than math. but a little arithmetic goes a long way when judging the affordability of loans you may be offered.

[BadJuju]

Re: Autos, usury, Irrational customers

I suck at life, but I do well with mathematics.

[charliebrown]

Re: Autos, usury, Irrational customers

rotflol - thanks for a good belly laugh my friend.

I'm kind of leaning toward's thrifty's camp. Most of the blame is on the lenders. But the system was rigged where they would not pay the price of making bad loans.
I try to teach my kids that math is important every day. They have to figure out if a 20% off sale is better than a buy 3 get 1 free sale, and to balance a check book,
and to figure if they can pay a loan back. It is an uphill battle.

[c1ue]

Re: Autos, usury, Irrational customers

No. They were on the same side of the scam as their ag worker counterparts...

I disagree.

Ag worker <--loan --> bankster originator <-- MBS --> 'bond' buyer

There are 3 sides in this equation.

[GRG55]

Re: Autos, usury, Irrational customers

I disagree.

Ag worker <--loan --> bankster originator <-- MBS --> 'bond' buyer

There are 3 sides in this equation.

Derivatives are a zero sum game. Winners. Losers. Two sides. Take your pick...

[Polish_Silver]

Re: Subprime Auto Loans - Shotgun Marriage

It's the same here. The advertised price has to be the credit card price.
Why this law was not ruled unconstitutional--restraint of trade, pursuit of happiness, can only be attributed to FIRE influence.

[c1ue]

Re: Subprime Auto Loans - Shotgun Marriage

Derivatives are a zero sum game. Winners. Losers. Two sides. Take your pick...

The people getting the crap home loans weren't involved in derivatives.

Furthermore the scam wasn't that the MBS's were derivatives, the scam was that the underlying stock of the derivative was fraudulent, and that the fraud was perpetrated by the banksters in the middle: liar loans to borrowers on one side repackaged into liar AAA securities to fixed income investors on the other.

There were derivative based scams - these would be the various 'insurance' derivatives - but the core crime was fraud as described above.

[ProdigyofZen]

Re: Subprime Auto Loans - Shotgun Marriage

It's the same here. The advertised price has to be the credit card price.
Why this law was not ruled unconstitutional--restraint of trade, pursuit of happiness, can only be attributed to FIRE influence.

I use my credit card for all purchases, earn miles and pay it off every month.

Now I just got to use those airline miles before PCO really kicks in!

[Polish_Silver]

Re: Who to blame

I leave the borrowers out of the blame.

If one is in the business of lending money, one must assume that crowds of people will come in to request loans they will never pay back. Lenders honestly earn a big part of the interest by working hard to turn away most of those unqualified borrowers, and by accepting the losses on the ones that get through despite these efforts.

While I'm sure some deadbeat borrowers are no better than thieves who knowingly cheat the bank, many others are somewhere on the spectrum of deluded dreamers and fools who think a miracle will help them make the payments.

Our problems today are not due to some sudden increase in deadbeats trying to get loans - those have always been abundant.
Our problems are due instead to a sudden increase in shady lenders making bad loans knowing they can either sell the loans to fools or get insurance to avoid the inevitable losses.

I agree with that argument. The securitization process meant the lenders were selling the loans to people who knew nothing about the lenders. And the lenders and bond raters took steps to obscure the low quality of the loans.

Makes me never want to invest in a debt instrument of any kind, ever. I mean, sovereign bonds are also cloaked in various deciets---nations lie about their accounting, demographics, etc.

[don]

Re: Who to blame

Another reason the MBS have remained "insolvable" is that single mortgages were rolled into multiple MBS. Thievery and deception on a grand scale.

I blame Joe Six-Pack.