I’ve been harping on the coming Subprime Auto Loan Crisis II for a while now, but that’s because the news is getting worse, not better. To wit:
A panoply of investigations into lending practices for so-called subprime, or riskier, borrowers, coupled with concerns about the exits of some auto-finance company investors, have some market observers warning that trouble could lie ahead.
“When you lower your credit standards, eventually the bonds will default and they’ll fail,” said Chris Hentemann, a veteran asset-backed securities investor who runs the hedge fund 400 Capital Credit Opportunities. “So that’s why we’ve decided to step aside.”
Hentemann, 46, should know: He once ran the global structured product desk at Bank of America, which included asset-backed securities like those based on mortgage and car loans, and was there during the early stages of the credit crisis.
You don’t have to have Netflix Streaming to watch this house of cards collapse.