Ally CEO: ‘Complete garbage’ to compare mortgage and auto booms

NEW YORK Jan 29 (Reuters) – Ally Financial Inc
Chief Executive Michael Carpenter said on Thursday that the
growth of subprime auto lending over the past few years did not
pose a systemic risk to the broader financial system.

Theres a thesis out there that subprime auto is the next
subprime mortgage crisis, Carpenter told Reuters in an
interview. We think that is complete garbage, he added.

Auto loans made to borrowers with credit scores under 660,
considered by many in the industry to be the dividing line
between prime and subprime, have been growing briskly. There
were over $24 billion of such loans outstanding in the third
quarter of 2014, 19 percent more than in the third quarter of
2012, according to Experian Automotive.

Ally is one of several auto lenders that have received
subpoenas in recent months from the US Department of Justice
requesting information around subprime auto finance and
securitization practices.

Theres a lot of fishing going on because of the analogies
or theoretical analogies with subprime mortgage crisis and its
a lot of digging around to see what people can find, Carpenter
said of the investigations.

One focus of the Justice Departments inquiry is whether
there was appropriate disclosure made to investors about the
quality of securities that are backed by auto loans. Fraudulent
disclosures to investors in mortgage bonds were the main issue
in the Departments investigation of Bank of America Corp
and Citigroup Inc that resulted in nearly $24
billion in settlements in 2014.

Carpenter said a crucial difference between subprime
mortgage bonds and subprime auto bonds is that the latter are
still performing well and have not cost investors any money.

Weve shared our analysis with our regulators and I dont
think anybody seriously believes that the two asset classes are

(Reporting by Peter Rudegeair; Editing by Meredith Mazzilli)

Sheila Coffin seeks Liberal Nomination in District 7

“I am seeking the nomination to provide the people of the district a choice,” she said. “The issues are many and I want to be there to help. We all know and feel what is happening in our communities every day. There are many struggling to make ends meet. Whether it is low wages, families living apart due to lack of job opportunities, western jobs dissolving and bills needing to be paid we have to find some solutions. We are an aging population wanting accessible health care. Fishing, farming and small businesses all require help. Our youth are leaving.”

Holding a number of positions during her working career with the Government of Canada, she also provides support to the Harbour Authority of Savage Harbour as secretary/treasurer, is a member of the Royal Canadian Legion Branch #4, sits on the property/finance committee with St. Andrew’s Roman Catholic Church and has helped raise money for the Hospice/Palliative Care on PEI. She also co-chaired the National Old-Timers Baseball Tournament which hosted the most teams ever along with their families here on PEI. for a four day tournament.

Coffin has two daughters; Becky married to Shawn McCord living in Ottawa with their three-year-old son, Owen and Kara married to Trevor MacDonald living in Lakeside, PEI. with their eight month old daughter, Jordyn.

The nominating convention for District 7 is March 11h.


Harbour Authority of Savage Harbour, Royal Canadian Legion Branch, Roman Catholic Church Hospice/Palliative Care on PEI.

Geographic location:

PEI., Canada, Ottawa Lakeside

The Next Subprime Crisis Has Already Started

Reading about whats going on in the subprime auto lending space is a lot like reading about drive-by shootings.

Unless youre a subprime borrower, or live in a neighborhood where drive-bys are happening, you probably dont know much about either or think they affect you.

But if you listen closely theres muffled financial gunfire already in your neighborhood.

And its much closer to your doorstep than you think.

Heres what you need to know

Yield Chasers Have Found a New Target

Subprime auto borrowers are getting killed by dealerships, their financing agents, and banks putting them on the financial frontline for default.

Even if not everyone is a subprime auto borrower the trend is rippling out into the US economy.

New and used auto dealerships and their finance arms, manufactured lending partnerships, banks, private equity companies, insurance companies, mutual funds (and the usual cadre of lap-dog lobbyists and paid-for legislators) are doing to subprime auto borrowers what coddled mortgage lenders did to subprime housing borrowers.

They are teeing them up for a long drive down a dead-end road.

The game at both ends and in the middle is just the same. So are a lot of the players.

On the output end are the investors. Fixed income investors from mutual funds and insurance companies to mom and pop investors are once again desperate for yield.

When the Federal Reserve kept interest rates low through the 2000s, fixed income investors reached for yield further and further out on the risk spectrum. On the very end of the yield trees flimsiest limbs, subprime mortgages and mortgage-backed securities blossomed. And investors picked them off like the low hanging fruit they appeared to be.

We know what happened next.

Ever since 2008s credit crisis and the Great Recession, the Feds zero interest rate policies made it even harder for savers and bond investors to earn any interest.

So, with the mortgage tree cut down, the usual-suspect financial intermediaries cultivated the next best species of fruit-bearing trees: auto loans.

As financial intermediaries, banks make a lot of auto loans, but not as many as financing arms of auto manufacturers. And because auto loans are so profitable, lending partnerships and private equity companies and other investors eagerly provide abundant pools of money to borrowers in need of financing new and used cars.

Its really these intermediaries that keep the wheels of the auto industry turning.

How fast are those wheels turning? Because of abundant financing and low interest rates, new light-vehicles sales in 2014 totaled over 16.5 million units. Thats up 5.6% from 2013 and the highest new vehicle sales level since 2006.

According to, loans to prime borrowers on new vehicles average 2.75% on six-year term loans.

But its not just auto manufacturers financing arms and banks providing money to new car purchasers thats making auto sales pop. The same banks and manufacturers financing units, along with aggressive financing partnerships, are providing huge pools of money to dealers of used cars across the country.

According to the Federal Reserve, outstanding auto loans for new and used cars reached $934 billion at the end of September 2014. Thats up from a total of $809 billion outstanding just two years ago. By the end of the first quarter of 2015 the total outstanding volume of auto loans is expected to exceed $1 trillion.

While prime borrowers financing new and used cars arent worrisome just as prime mortgage borrowers werent a problem in the heyday of the housing boom its subprime borrowers who are eclipsing prime borrowers in the auto sales arena, just as they did in the late stages of the housing boom, thats becoming a worrisome trend.

And just like in the mortgage-money free-for-all, its the intermediaries pushing loans on subprime borrowers. They can then charge them exorbitant interest rates. Thats whats fueling the rapid increase in subprime auto lending, especially on used cars.

Of course, in the modern era, very few intermediaries keep the loans they make on their books. Instead, they rely on other banking intermediaries or their own in-house securitization assembly lines to package thousands of auto loans into asset-backed securities to sell to eager investors seeking above market interest rate investments.

The difference in the new subprime rip-off game is in the input function of the financing equation.

Used car buyers in the latest push-them, plunder-them, package-their-promises, and sell them to salivating yield-hungry investors are far less credit worthy than the crap-shooting, credit-impaired homebuyers sucked into the mortgage mania game.

Sadly, its the lowest rung of borrowers, many of them desperate for transportation to look for work, get to work, to take sick family members to and from doctors and hospitals, or to run their small transportation businesses, that get saddled with the worst high interest rate loans.

Of all outstanding auto loans made up to the end of Q3 in 2014, 23% were subprime loans to borrowers with less than a 640 credit score. Thats up from 21% in 2009. Still, not as high as the 28% share subprime borrowers accounted for in pre-recession 2007.

Because of the way used car dealers are incentivized to make the biggest loans possible to subprime borrowers, they regularly roll in extras to the whole loan they offer unsuspecting or desperate buyers: title, taxes, dealer-prep fees, extended warranties, undercoating and rustproofing charges, sometimes collateral insurance, and the cost of buying out an existing loan on a trade-in.

As a result, on approximately 23% of subprime loans, the outstanding principal owed exceeds the resale value of the purchased vehicle by 200%.

Experian Automobile, a unit of credit rating company Experian, recently reported that as of September 2014 the average loan-to-value on all financed autos was close to 115%.

Of all auto loans made last year, 31% went to subprime purchasers. Thats up 17% in two years.

With interest rates often starting at 22% annually, its not hard to see why delinquencies are on the rise

5 shares the pros are buying and selling

5 shares the pros are buying and selling
A roundup of trades by professional investors. This time we look at DP Poland, Braemar, GB Group, Zotefoams and Safestay.

State Auto Insurance Providers Added to Low Rates Finder at Insurer Portal Online

PR Web

Midland, TX (PRWEB) January 19, 2015

Adults seeking lower prices for a general insurance policy in the auto industry this year can now sort through a list of state auto insurance providers using the Quotes Pros portal. The low rates finder available at is now supplying access to state companies serving 2015 rates.

The revised listing of state companies this year is expected to increase the search options for motor vehicle owners who are hoping to upgrade insurance coverage at a lower cost. Because pricing by state can vary drastically, the search tool is now sorting companies from lowest to highest price by zip code.

Adults enter our system after supplying their zip code and receive access to companies, rates and policy information automatically, said a Quotes Pros rep.

The insurers that are located through use of the portal supply more types of coverage aside from general collision plans. A car owner now has the ability to obtain full coverage, collector, modified or broad form price data using the database in place to find New Year price information.

Finding out how much car insurance costs is now a simpler procedure when using our revised portal for research, said the rep.

The Quotes Pros company is now providing opportunities for consumers to review medical industry and life protection industry agencies through the database. Prices for term life insurance and health insurance protection can be freely explored at


The company provides resources to find, compare or to purchase different formats of insurance coverage on the web. The company has used its portal to educate consumers since 2013 and industry pricing. The company showcases one of the fastest tools to review pricing from providers through its automatically updated database of insurers that are all US based.

Read the full story at

Senior Bowl 2015 Roster: Highlighting Top NFL Prospects in College Showcase

Senior Bowl 2015 Roster: Highlighting Top NFL Prospects in College Showcase

Steven Cook
, Featured Columnist

Investor Greed Leads To Risky Auto Loans; Ain’t Capitalism Great?

The New York Times manages to get into one of its disapproving snits here over the issue of bad credit auto loans. They’re really quite going to town on the issue: systemic risks, syndication, slicing and dicing of tranches, high interest rates. It’s almost like they’re rewriting the housing market of 2005 and what joy they’re having in doing so. I have to admit that my reaction to the same evidence is really to think, well, ain’t capitalism great? Or perhaps to ponder the joys of a free market system.

It is difficult for me to understand what it is that they are really complaining about:

Across the country, there is a booming business in lending to the working poor — those Americans with impaired credit who need cars to get to work. But this market is as much about Wall Street’s perpetual demand for high returns as it is about used cars. An influx of investor investor money is making more loans possible, but all that money may also be enabling excessive risk-taking that could have repercussions throughout the financial system, analysts and regulators caution.

We generally think it is a good idea that poor people can gain access to a car. Because we also realise that access to a car is the first step on being able to get a job and thus become less poor. And we also generally think that investors (most of whom are in fact just our own savings and pensions being washed through the system) make a return as that means that we’ll all have pensions come the time. So quite why we should worry about the fact that our future pensions are being used to aid poor people buying cars is difficult to see. It would seem that everyone’s getting what they would like to get out of this.

Now questions are being raised about whether this hot Wall Street market is contributing to a broad loosening of credit standards across the subprime auto industry. A review by The New York Times of dozens of court records, and interviews with two dozen borrowers, credit analysts, legal aid lawyers and investors, show that some of the companies, which package and sell the loans, are increasingly enabling people at the extreme financial margins to obtain loans to buy cars.

But we want a loosening if credit standards across the country. This is the entire point of quantitative easing for example. Drive down yields on safe assets so as to encourage people to go off and pick riskier ones in the pursuit of that yield. Heck, the Fed has printed $4 trillion in pursuit of exactly this result. And everyone does agree that QE has worked. It’s most certainly aided in lifting the economy up out of the recession. So now they want to complain about what has been desired and what was planned for?


The danger, though, is that lenders may be encouraged to lower their credit standards to churn out loans to keep up with investor demand. The deterioration that securitization can fuel has already begun as lenders reach lower and lower down the credit spectrum to find enough borrowers whose loans can then be put into investments.

Again, isn’t this what we want? That more and more Americans, increasingly poorer groups of Americans, be rescued from the terrors of financial exclusion? I thought that was rather the point of a large amount of what we do already. A desire to make the poor better off?

The NYT sees all this and think that it will spell disaster. I look at it and glory in the delights of this free market capitalism stuff. Poor people get cars, other people get their pensions paid and in order to make this happen no one needed to plan anything. No committee was appointed to decide whether it was of social benefit, no electoral funding grease had to be supplied to politicians, no bureaucrats implored for permission. But just that plain old fashioned greed has led to one group of people asking another, well, you want $20 billion a year to buy cars with? As the answer is yes it happens.

And do note that $20 billion a year isn’t going to cause systemic risks in a $17 trillion economy. That fear is just too laughable for words.

Why are they going “Tsk!” about it and I’m applauding?

Berko: Put brakes on plans to invest in auto stocks

Dear Mr. Berko: I bought 300 shares of General Motors at $26 over two years ago, even though you said it was a dumb investment. Auto sales have been taking off, and now Im asking whether you think it would be a good investment to buy 600 shares of Ford or more General Motors.

— MT, Erie, Pa.

Dear MT: No, a hundred times no, dont buy General Motors (GM-$33.72) or Ford Motor Co. (F-$14.85). I doubt either will repeat its 2014 sales performance. And I doubt the consumer has enough purchasing power remaining for a repeat performance in 2015. Frankly, I suggest you sell the 300 GM shares I told you not to buy at $26 in October 2012.

When I visit some of the big cities in the southeastern part of the country, Im impressed by the furlong-long lines of gleaming new (and old) cars blanketing the myriad car lots that dot busy corners and major highways of these cities. Automobiles seem to be among the few assets of which the prices are not affected by supply and demand. If they were, everyone would be able to buy a good used car for a few hundred dollars. It seems that there are more cars than there are cats, dogs and goats, and people in management at GM, Ford, Chrysler, Toyota are watching auto sales zoom. Americans are hungry for new cars, and dealers sold nearly 17 million cars in 2014 while raking in prodigious profits. Trucks and SUVs represented 53 percent of vehicle sales last year, and most buyers are purchasing their rides with numerous add-ons, enabling car dealers to book triple-markup profits. Dealers are offering attractive discounts, car loans with no money down, zero-interest (big laugh) loans, cash rebates, iPads, TV sets, vacations in the Bahamas, loans that require no payments for six months, free maintenance for 12 months and a years worth of gas. And while broader consumer spending is showing signs of fatigue, auto sales are sizzling and setting records. But not for long.

Auto loans today are as easy to get as home mortgages were a decade ago. Today almost anybody with a voice and a pulse who is able to scratch an X on a sales contract can get financing for a car. It seems that auto dealers, banks and credit unions consider auto loans to be an entitlement, so very few applicants are turned down. Unfortunately, Americans are taking on new debt at record levels. Todays average household credit card debt is $16,085; the average home mortgage is $155,000; and the typical wage earner takes home about $36,000, which is less than he earned prior to the Great Recession. Most folks have less spendable incomes and are abusing their credit as a drunk does with a bottle of bourbon. I know of a 26-year-old unemployed dope smoker who recently bought a nearly new Ford F-150 for $33,600, using his fathers credit card for the $3,000 down payment. Ill wager a pocketful of 50s to a pig penny that this kid will default in the next two to three years and that his loan balance will exceed the market value of his truck.

Todays auto loans are securitized, bundled and sold to yield hungry investors, just as Goldman Sachs, Citigroup and Bank of America misrepresented, packaged and sold subprime mortgage securities to investors who then lost their shirts. The huge New England Federal Credit Union and America First Credit Union, plus other lenders, now offer car loans for eight years (96 months) at rates between 3.24 percent and 6.25 percent. Those loans last longer than most marriages today. Meanwhile, Card Hub expects over $31 billion in credit card defaults for 2015 and believes that the default rate will approach $37 billion in 2016. As I said, the consumer is making less today than he was before the recession, and his debt is at record levels. So the $64 question is: How much more can the consumer borrow until hes out of breath?

Huntington’s Upbeat Forecast Driven by Auto Loans

About college football’s deflated ball scandal…

Getty Images

The whole deflated ball thing isnt exactly new, at least at the college level.

As the NFL sorts through allegations of deflated balls in New Englands 45-7 blowout win over Indianapolis last night, now seems like a good time to bring up Oregons 62-51 win over USC in 2012. After that game, Oregon alleged USC purposely deflated balls it used on offense in the first half of that game, with coach Lane Kiffin insisting he had no knowledge of a student manager illegally altering the balls.

USC was fined $25,000 for the incident and the student manager in question was fired. From our report from November 2012:

The report adds that officials found and re-inflated three footballs before the start of the game, and two more at halftime. The student manager claims he was not given instruction to deflate the game balls — under-inflated footballs are easier to hold onto, catch and throw, and offenses use their own footballs — if you believe that sort of thing.

Like the Patriots-Colts thing, the deflated balls didnt have much of an impact on the game Oregon still managed 34 points in the first half and USC only cut the final score to a respectable (I guess) 11 points when Marqise Lee caught a three-yard touchdown from Matt Barkley with three seconds left.

Kiffin, meanwhile, is reportedly a candidate to leave Tuscaloosa for the 49ers offensive coordinator position.