Banks have money, thanks to the government. And they will find ways to lend that money till they again dig themselves a hole.
Can anyone explain to me how handing out sub-prime loans to anyone is a "sign of health returning to the economy?"
If you look at the graph next to the article, the number of sub-prime auto loans being issued is not up to the level it was during 2005–2009. (Unfortunately the graph doesn’t go any farther to the left, so I can’t tell if 2005–2009 was a bubble in the auto-loan market or just business as usual.) And defaulting on a $20K car loan is not nearly as disastrous (for the borrower or the lender) as defaulting on a $200K mortgage.
Unless of course there are 100 times the number of housing defaults, because the car is not worth the price it was bought at a month later after it's used. Unlike land, cars never increase in value, they only plummet.
I've never owned a car newer than 10 years old, I don't know why people have to drive brand new cars, they certainly don't get better gas milage (and apparently many people are using the credit to buy SUVs anyway).
¶ People who live in depressed areas who are underwater on their mortgages can’t move to someplace with better job prospects unless they abandon hope of recovering the equity in their current house.
¶ In neighborhoods where a significant number of houses have been foreclosed on (or where there is a lot of excess capacity because it was built up right before the bubble burst), all property values suffer, even the value of houses where the owners have good credit and have been making their payments.
¶ It’s a PITA for a bank to sell a foreclosed house, especially in a neighborhood where there have been a lot of other foreclosures (see above).
None of these factors apply to car loans.
Zero punishment, even when caught, so zero risk.
They are also doing end-runs now around housing regulations, discovering that by requiring 20% down payment, the bank escapes liability for bad loans, regardless of other terms or buyer worthiness.
The result was poorly priced loans that were bought with extreme amounts of leverage (100x was not unusual). When your collateral turns out be worth a fraction of what you thought, your lenders get prickly and want their money back. Except there is no money. Take that and spread it all around the world, and you have a mess.
Fraud, although I'm sure there was a bunch of it (as there always is) that really had nothing to do with it. Don't look for conspiracy when incompetence is staring you in the face.
This was not a financial industry problem. It was created by unrealistic homeowners, opportunistic bankers, stupid politicians, and a culture that says (for some reason I can't fathom) that home ownership is inherently good. In other words, just about everyone. If you bought or sold a home in the last 10 years, you contributed to the mess in your own tiny way.
And yes, it will happen again. Not one thing of substance was done to stop it after the fact. In fact, the government (yes, that's our fault again) has increased the likelihood of future meltdowns by introducing an unprecedented level of moral hazard by bailing out troubled entities.