Subprime Auto Loan Worries

At car dealers across the United States, loans to subprime borrowers 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.

In its efforts to jumpstart the economy, the U.S. central bank has undertaken since November 2008 three rounds of bond-buying and cut short-term interest rates effectively to zero. The purchases of mostly Treasury and mortgage securities – known as quantitative easing and nicknamed QE1, QE2 and QE3 – have injected trillions of dollars into the financial system.  Are we in danger of a car financing bubble burst?

Check out Reuters Special Report on this troubling story: http://www.reuters.com/article/2013/04/03/us-usa-qe3-subprimeauto-special-report-idUSBRE9320ES20130403