Banks will repossess vehicles to try and minimise losses
Banks will not be able to sell those repossessed vehicles, resulting in losses
Banks may become insolvent as they are unable to liquidate the vehicles
Government steps in to bail them out
New vehicle prices are not in line with their actual value, so banks are making loans that aren’t covered by the collateral. This is shit management by the banking industry. If it’s impossible to get an auto loan then vehicle prices will eventually fall as supply stacks up. Banks are feeding this cycle by being unrealistic in these loan assessments.
This is what my partner and I call a “state’s right to what” problem. The centralized wealth says that centralizing wealth is good. Centralizing wealth is good for whom, Mr. Finance?
4 probably won’t happen. The mortgage bailouts were a bit of a special case, because the debt was rolled into securities and spread all over the place. To my knowledge there isn’t a secondary market for auto loans, so the scope is limited to individual banks.
What may happen is the FDIC guarantees all deposits like they did with silicon valley bank, which is less bad than a full on bailout.
Well, yes and no. It’s grey like most things in life.
Banks and credit are a means to “grow the pie” by allowing us to factor in future value. Before banks and credit, the world was a zero sum game where one person only had because the other person had not.
They do serve a real purpose but are only valuable when properly managed.
They won’t have to worry about selling the cars, some used car dealer will take them off their hands gladly. What the banks and the financiers will have to worry about is how to bundle all of that bad debt into CDOs. There’s a movie about this I think.
So basically,
New vehicle prices are not in line with their actual value, so banks are making loans that aren’t covered by the collateral. This is shit management by the banking industry. If it’s impossible to get an auto loan then vehicle prices will eventually fall as supply stacks up. Banks are feeding this cycle by being unrealistic in these loan assessments.
But… But price only go up?
The sky daddy book of economics says price only ever goes up and concentrated wealth is a good thing
This is what my partner and I call a “state’s right to what” problem. The centralized wealth says that centralizing wealth is good. Centralizing wealth is good for whom, Mr. Finance?
4 probably won’t happen. The mortgage bailouts were a bit of a special case, because the debt was rolled into securities and spread all over the place. To my knowledge there isn’t a secondary market for auto loans, so the scope is limited to individual banks.
What may happen is the FDIC guarantees all deposits like they did with silicon valley bank, which is less bad than a full on bailout.
So either banks make money or banks take money.
Well, yes and no. It’s grey like most things in life.
Banks and credit are a means to “grow the pie” by allowing us to factor in future value. Before banks and credit, the world was a zero sum game where one person only had because the other person had not.
They do serve a real purpose but are only valuable when properly managed.
They won’t have to worry about selling the cars, some used car dealer will take them off their hands gladly. What the banks and the financiers will have to worry about is how to bundle all of that bad debt into CDOs. There’s a movie about this I think.
Don’t forget people also not being able to go to work anymore potentially