14 October 2014

GolemXIV: Trouble In Bankland

In the US:

  • Home Equity Loans (HELOCs) are up 20% this year. 15% of all home loans originated are home equity extraction loans.
  • People are taking equity out of their homes in the reigniting housing bubble, but adding to their bank debt.
  • Student loans now total $1.2 Trillion.
  • Nearly 35% of student loans [I believe David inadvertently says HELOC at one point] given to people under 30 are now 90 days delinquent.
  • There are $924 Billion in auto loans, with nearly one third being subprime.
  • It will not take much of a downturn for the HELOCs to go underwater.
  • Jobs for those servicing new student loans are often low paid and hard to find and could become scarcer prompting more defaults.

In Europe:

  • Royal Bank of Scotland (RBS) has now lost ALL of the £46 Billion bailout from taxpayers
  • Espirito Santo recently went bankrupt AFTER recently passing the ECB stress test.
  • Not only the bank, but the entire Espirito Santo group went bankrupt, after the bank sold their associated debt to unsuspecting clients.
  • This certainly does not inspire confidence in any of the ECB testing of the Banks. We would have no confidence in an agency that tested cars with these kinds of results.
  • There were fifteen other EU banks that passed in the weak manner of Espirito Santo.
  • The Spanish/Italian/Greek Banks were allowed to count tax credits from the government as assets.
  • What if China decides to support its domestic coal production by assessing a 3 to 6 percent surcharge on imported Australian coal? It would dampen exports and GDP.
  • Australia's huge housing bubble is counting on 8 to 12 percent house increase NEXT year.

If things go south, the ECB,  Fed, and other Central Banks will have to engage in another enormous bailout.

Source: GolemXIV