SHARMINI PERIES: Bill, just how serious is this problem with the subprime auto loans? Bloomberg makes it look like it could be a real problem. We're dealing with about a trillion dollars' worth here.
BILL BLACK: It's a very severe problem for consumers who are going to lose not only their cars, but their credit ratings. It's a moderate problem for some of the banks. It's not a systemic problem on the order of the Great Recession and the financial crisis that drove it. For one reason, it simply doesn't create the same kind of bubble dynamics in the housing context by allowing large numbers of people to buy homes -- that can't afford to repay the homes. Effectively, you create much more demand. All other factors held constant, that means price goes up. You don't really get the same kind of effect, except in the very modest proportions in the auto market. So A, it's a much smaller market. B, it doesn't have this bubble, so it's not going to cause a systemic crisis....
Predatory lending continues.
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