The underlying details of what continues to be one of the weakest economic recoveries in U.S. history don’t offer much hope for any substantive improvement anytime soon. The latest evidence of such is offered up in this special report by Reuters that helps to explain why auto sales have been booming over the last year.
Thanks largely to the U.S. Federal Reserve, Jeffrey Nelson was able to put up a shotgun as down payment on a car.
Money was tight last year for the school-bus driver and neighborhood constable in Jasper, Alabama, a beaten-down town of 14,000 people. One car had already been repossessed. Medical bills were piling up.
And still, though Nelson’s credit history was an unhappy one, local car dealer Maloy Chrysler Dodge Jeep had no problem arranging a $10,294 loan from Wall Street-backed subprime lender Exeter Finance Corp so Nelson and his wife could buy a charcoal gray 2007 Suzuki Grand Vitara.
All the Nelsons had to do was cover the $1,000 down payment. For most of it, Maloy accepted Jeffrey’s 12-gauge Mossberg & Sons shotgun, valued at about $700 online.
In the ensuing months, Nelson and his wife divorced, he moved into a mobile home, and, unable to cover mounting debts, he filed for personal bankruptcy. His ex-wife, who assumed responsibility for the $324-a-month car payment, said she will probably file for bankruptcy in a couple of months.
When they got the Exeter loan, Jeffrey, 44 years old, was happy “someone took a chance on us.” Now, he sees it as a contributor to his downfall. “Was it feasible? No,” he said.
At car dealers across the United States, loans to subprime borrowers like Nelson are surging – up 18 percent in 2012 from a year earlier, to 6.6 million borrowers, according to credit-reporting agency Equifax Inc. And as a Reuters review of court records shows, subprime auto lenders are showing up in a lot of personal bankruptcy filings, too.
It’s the Federal Reserve that’s made it all possible.
If you want to better understand the nature of this so-called economic recovery, read on.
Easy money is being summoned once again to counter the effects of the last burst asset bubble that was caused, in large part, by easy money. As if there weren’t enough things to worry about today, now we have a burgeoning business in high-yield bonds backed by subprime auto loans to be concerned about, compliments of the Fed.