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Yesterday, US auto sales posted their biggest month in the last six and a half years. Ed Yardeni has a great chart on the post-crisis auto boom and notes that November's 16.4 million units sold is a new cyclical high. The two-month sales average is 15.8 million units, Yardeni adds, up only slightly from the third quarter.
John McDuling wonders if auto lending numbers are telling us a story about America’s post-crisis debt habits. Housing debt has fallen since 2008, but “non-housing debt, which includes credit cards and car loans,” he writes, “is actually back at pre-crisis highs.” Subprime loans, meanwhile, made up 36% of new vehicle loans in the second quarter, David Henry reports, up from 34% a year earlier.
“The market for subprime borrowing is once again becoming frothy”, in the car loan business, Bloomberg writes. Which is why borrowers with a 500 credit score can get loans for new cars and shotguns can serve as down payments. One auto dealer suggested to Bloomberg that auto loans are safe simply because they’re the last debt that Americans neglect: “A person that has to get from point A to point B, they’re not going to jeopardize their job.” 18-29-year-olds, however, seem to be borrowing less frequently.
Fitch Ratings managing director Amy Laskey talked to Fox Business about how Detroit is a unique story in muniland. Fitch published a research note on the bankruptcy ruling and concluded that Detroit’s ruling would not lead to a “spate” of local bankruptcies in Michigan:
Although the judge ruled that pensions could be adjusted, Fitch does not believe the ruling grants Detroit's emergency manager unlimited freedom to adjust these obligations. The city must submit a plan of adjustment to the bankruptcy court, which must be deemed 'fair and equitable' by the presiding judge. The emergency manager expects to submit the plan to the court by year-end. Fitch does not believe that the judge's decision on pensions will lead to a spate of additional bankruptcy filings in Michigan.
from Alison Frankel:
In Tuesday's ruling that Detroit is eligible for federal bankruptcy protection, U.S. bankruptcy judge Steven Rhodes set crucial precedent on a municipality's right to cut pension benefits through the Chapter 9 process. Michigan's state constitution, like those of many other states, specifically protects the pension rights of public employees. Before Detroit even filed for Chapter 9 in July, some of its pensioners went to state court to block the bankruptcy, arguing that it's a violation of the state constitution to tamper with their benefits. Rhodes squelched that litigation and asserted his federal-court jurisdiction, but retirees and unions continued their challenge to the city's right to meddle with their pensions, just as California's vast public pension fund, Calpers, has relentlessly resisted any suggestion that the bankrupt cities of Stockton and San Bernardino might reduce their pension obligations. In a first-ever ruling on the impairment of pension obligations in a Chapter 9 proceeding, Judge Rhodes held Tuesday that neither the Contracts Clause nor the Tenth Amendment of the U.S. Constitution prohibits Detroit from cutting pension benefits, even if those benefits are protected in the state constitution.
"Municipal pension rights are contract rights, and...the impairment of such contract rights in a municipal bankruptcy case is a regular part of the process," Rhodes concluded, according to a court-issued summary of his findings. "Because the State of Michigan authorized the filing of this case, municipal pension rights in Michigan can be impaired in this bankruptcy case, just like any other contract rights." (Rhodes read his eligibility ruling from the bench; a written opinion is to follow.)
By Dominic Elliott and George Hay
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.
The rewards of early settlement in the Libor scandal are becoming more obvious. The first banks to settle with financial agencies over allegations of rate-rigging, Barclays and UBS, have just saved $930 million and $3.4 billion respectively in trust-busting fines after blowing the whistle on other miscreants to the European Commission. Their lenient treatment highlights the risks in delaying settlements, and the potentially extreme penalties when wrongdoing is categorised as anti-competitive.
from Financial Regulatory Forum:
By Henry Engler, Compliance Complete
NEW YORK, Dec. 4 (Thomson Reuters Accelus) - Although five years have passed since the height of the financial crisis, top lawyers at some of the largest U.S. banks see themselves pitted in an escalating, and at times adversarial, battle with regulators, the end of which remains unknown.
At a conference sponsored by the Clearing House on Friday, senior legal representatives from JPMorgan and Bank of America painted a picture of unprecedented enforcement actions and fines across a wide range of issues, adding that the zeal of recent actions could potentially disrupt the supervisory and cooperative relationship that has long existed between banks and regulators.
from The Great Debate:
Bills have been introduced into both the House and the Senate to dismantle the federal government’s role in interstate highways and leave that massive responsibility to individual states. Tea Party adherents and other conservatives are applauding this effort. The Interstate Highway System, they argue, was largely completed in the 1980s and local communities should provide their own transportation needs.
The new transportation bill proposed by Senator Mike Lee (R-Utah) and Representative Tom Graves (R-Ga.) however, tragically misses the mark when it comes to our national infrastructure needs. Their legislation would abandon the highway trust fund just when our roads and highways are most in need of reconstruction, repair and expansion.
from The Great Debate UK:
--Vikas Pota is chief executive of the Varkey GEMS Foundation. The opinions expressed are his own.--
It was results day yesterday for education ministers around the world, and where they’ve come in the class will affect their prospects just as surely as a sixth-former opening their brown envelope. Nowhere around the world will the wait have been more nail-biting than in Michael Gove’s Department for Education.
from Edward Hadas:
The leading theories of economics and finance are usually produced for the rich. Pope Francis deserves praise for suggesting an economics for the poor.
The typical criteria of economic success – such as efficient pricing, fully competitive markets and rapid GDP growth – sound uncaring. And they often are. One problem is that most of the leading theories have an implicit pro-rich bias. For example, the Capital Asset Pricing Model, a basic tool in finance, assumes that the rich investors who can afford to take big bets deserve extra-large rewards when things go well. Or consider how most governments’ economic policy aims first and foremost at GDP growth, basically ignoring the uncomfortable truth that the already rich typically take a disproportionate share of additional production.
By Robert Cole
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Investors’ patience with Tesco, the UK’s largest supermarket operator, is justifiably wearing thin. Shares in the group rose in early trading on Dec. 4, as the company published third quarter sales figures. But that was probably because the numbers were no worse than expected. The stock price slipped back later in the day. Over the last two years Tesco shares have fallen 16 percent while the FTSE 100 has risen 17 percent.