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December 6, 2007
More credit worries
Oh boy, this doesn't look good -- Surge in Auto-Loan Delinquencies Is Latest Trouble for the Economy - WSJ.com. Why is this bad? As the story explains:
Car loans differ from home loans in one crucial way. During 2004-06, many home loans were made to speculators on the assumption that the underlying asset -- the home -- was sure to keep rising in value. Many people, inspired by fervor in the market, took out home loans that in retrospect they had little hope of paying back.
By contrast, everyone understands that the car behind a car loan is an asset destined to lose value. The typical delinquent borrower in a car loan isn't a speculator but someone who became unable to make what previously seemed like a manageable payment. That is why car delinquencies are closely linked to the health of the economy.
Not good. Not good at all.
Posted by Ken Jarboe at December 6, 2007 2:24 PM
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