{"id":13673,"date":"2015-10-22T06:03:33","date_gmt":"2015-10-22T11:03:33","guid":{"rendered":"http:\/\/olduvai.ca\/?p=13673"},"modified":"2015-10-22T06:03:33","modified_gmt":"2015-10-22T11:03:33","slug":"bank-failures-and-systemic-breakdowns-regulator-warns-on-autos-subprime-commercial-real-estate","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=13673","title":{"rendered":"\u201cBank Failures and Systemic Breakdowns\u201d: Regulator Warns on Autos, Subprime, Commercial Real-Estate\u2026"},"content":{"rendered":"<h3 class=\"entry-title\"><a href=\"http:\/\/wolfstreet.com\/2015\/10\/21\/individual-bank-failures-systemic-breakdowns-regulator-occ-warns-on-autos-subprime-commercial-real-estate\/\" target=\"_blank\">\u201cBank Failures and Systemic Breakdowns\u201d: Regulator Warns on Autos, Subprime, Commercial Real-Estate\u2026<\/a><\/h3>\n<p>If you look at auto sales, which are flirting with all-time highs, and at commercial real-estate prices, which are way beyond all-time highs, and if you look at the loans, including subprime, that make it all happen, you\u2019d think the US economy is in a white-hot economic boom.<\/p>\n<p>But the economy is barely limping along. What\u2019s booming is cheap but iffy debt that for the moment still looks good on the surface. And that is rattling bank regulators.<\/p>\n<p>\u201cWe are clearly reaching the point in the cycle where credit risk is moving to the forefront,\u201d explained Thomas Curry, Comptroller of the Currency, in a\u00a0<a href=\"http:\/\/www.occ.gov\/news-issuances\/speeches\/2015\/pub-speech-2015-141.pdf\" target=\"_blank\"><u>speech<\/u><\/a>\u00a0today. The Office of the Comptroller of the Currency (OCC) \u2013 one in the triad of federal bank regulators alongside the Fed and the FDIC \u2013 is fretting about banks\u2019 exposure to the increasing risks of ballooning\u00a0auto loans, particularly subprime auto loans, and commercial real-estate loans.<\/p>\n<p>As they did in the run-up to the Financial Crisis, banks are \u201crepackaging\u201d these loans, including subprime loans, into highly-rated asset-backed securities, in face of \u201cstrong demand by investors\u201d that are reaching for yield, in an environment where banks \u201care reaching for loan growth.\u201d After having \u201calready extended credit to their best customers,\u201d they\u2019re now lending to \u201cless creditworthy borrowers, with all of the increased risk that entails.\u201d<\/p>\n<p>But the auto-loan binge is good for everyone. It\u2019s good \u201cfor automakers and the economy,\u201d he said. \u201cIt\u2019s also good for banks,\u201d whose financing made \u201cthis activity possible.\u201d By the end of Q2, auto loans accounted for 10% of all retail credit in OCC-regulated banks, up from 7% in Q2 2011.<\/p>\n<p>Total auto-loan balances outstanding shot up 10.5% in 12 months at the end of the second quarter and hit $1 trillion, according to\u00a0<a href=\"http:\/\/investor.equifax.com\/releasedetail.cfm?ReleaseID=926850\" target=\"_blank\"><u>Equifax<\/u><\/a>. And 23.5% of new loans earlier this year were subprime, up from 22.7% a year ago.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u201cBank Failures and Systemic Breakdowns\u201d: Regulator Warns on Autos, Subprime, Commercial Real-Estate\u2026 If you look at auto sales, which are flirting with all-time highs, and at commercial real-estate prices, which are way beyond all-time highs, and if you look at the loans, including subprime, that make it all happen, you\u2019d think the US economy is [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[3891,54,10096,175,195,312,2564,10095,841,4254,4255],"class_list":["post-13673","post","type-post","status-publish","format-standard","hentry","category-economics","tag-auto-loans","tag-bank-failures","tag-commercial-real-estate","tag-credit","tag-debt","tag-financial-crisis","tag-subprime-loans","tag-systemic-failure","tag-us-economy","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13673","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13673"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13673\/revisions"}],"predecessor-version":[{"id":13674,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13673\/revisions\/13674"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}