1 ‘Sub-prime autos the next crisis’ (Chris Arnade in
The Guardian) Many people are buying cars with the help of Wall Street banks,
which are lending money to people with bad credit again – just as they did
prior to the financial crisis of 2007. In the last crisis, it was houses. The
$26bn worth of subprime car loans is far short of the $500bn of subprime real
estate securitization in 2006, at the top of the housing bubble, partly because
cars are a lot cheaper than houses.
This time, like last time, Wall Street isn’t
directly lending poor people money. That part is done by an array of smaller
financial companies in strip malls and office parks. The smaller financial
companies sell the loans to Wall Street. Wall Street puts them into big piles,
sorts them from weakest to strongest credit scores, and then sells the pieces
and parts of them to their customers. The customers can be hedge funds in
Greenwich, Connecticut, or other banks. No part of the loan goes unsold: from
the highest rates to the lowest-rated, buyers are always there.
This process is called subprime securitization, and
about $26bn of it will be done this year in auto loans to poor people. Who are
these borrowers? To quote Wall Street: “Obligors who do not qualify for
conventional motor vehicle financing as a result of, among other things, a lack
of or adverse credit history, low income levels and/or the inability to provide
adequate down payments.”
Meaning people who usually can’t borrow money. These
are loans that charge on average 17% a year, often exceed 20%, and sometimes
are as high as 30%. If 20% for a loan isn’t onerous enough, many now come with
a technological twist: the newer loans will turn off your car if you fall
behind. The $26bn of the financial crisis alone is not enough to cause a
financial crisis, but the philosophy behind it is. These are loans to desperate
people at desperate rates being facilitated by Wall Street.
2 France outlook cut to negative (BBC) Credit rating
agency Standard and Poor's has cut France's credit outlook to 'negative', due
to concerns about the country's struggling economic recovery. However, it
affirmed France's AA/A-1+ rating, the third-highest rating.
Official figures from the Bank of France showed that
the French economy did not grow at all in the second quarter, and for the third
quarter it is forecasting growth of 0.2%. It added that it expected France's
budget deficit will average 4.1% of GDP between 2014 and 2017, an increase from
earlier projections of 3.2%.
The French government has also said it will reduce
its budget deficit to below the EU threshold of 3% of GDP by 2017, two years
later than promised. S&P said the negative outlook indicated a one in three
chance that certain events would occur which would push it to downgrade
France's actual credit rating within the next two years. S&P last
downgraded France in November 2013 when it cut its rating to AA.
3 Ebola on the move (Khaleej Times) The contagious
disease Ebola is no more Africa-specific. It is now on the move and a couple of
cases had been tested positive in regions as far as Britain and the US. The mandatory screening of passengers from
African destinations landing in the US is a case in point, which hints at the
level of alert that is underway to fight the virus. This decision has come close
on the heels of concerns that US President Barack Obama expressed over the
spread of disease, and the slow pace of response from the world governments in
containing the infectious bug.
And now with reports that a Texas health worker —
who treated an Ebola victim before his death — has been tested positive for the
virus, the disease is supposed to be fought on a war footing. Many such
suspected patients that are quarantined elsewhere at Western airports and in
isolated clinics might prove out to be potential carriers of the virus,
impacting the health workers and medical practitioners.
This demands a high-profile research and development
index as well as a foolproof environment to contain the virus. As hoped by
United Nations Secretary-General Ban Ki-moon an early discovery of a vaccine
can be a source of great relief in preserving the world from going the Ebola
way. The symptoms of the dreaded disease are so concealed that any patient with
slight fever can get away from the mandatory checks at airports and clinics
only to explode later into a carrier of death. This phenomenon has to be
scientifically fought and exterminated.
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