"Back in 2007/2008, Wall Street drastically pulled back on mortgage origination for their own balance sheets while ramping up their issuance of RMBS securities.
Of course, the goal was very simple: package up all the mortgage-related nuclear waste on your balance sheet into a pretty package, tie a ribbon around it with that AAA-rating from Moody's and sell it all to unsuspecting pension funds and insurance companies around the globe.
Now, despite all the 'harsh penalties' that Obama imposed on Wall Street after the mortgage crisis, like that $1.8 billion settlement where we showed that Goldman will actually make money from their 'punishment', it seems as though the exact same scheme is currently underway with auto loans. Per Bloomberg:Both banks have grown more reluctant to make new subprime loans using money from their own balance sheets. Wells Fargo tightened its underwriting standards and slashed the volume of all loans it made to car buyers in the first quarter by 29 percent after greater numbers of borrowers fell behind on payments. JPMorgan’s consumer and community banking head Gordon Smith earlier this year said the bank had cut its new lending for subprime auto loans “dramatically.”At the same time the firms are indirectly funding billions of dollars of the loans by helping companies like Santander Consumer USA Holdings Inc. borrow in the asset-backed securities market, essentially shunting money from bond investors to finance companies. Wall Street banks packaged more loans from finance companies into bonds in the first quarter than the same period last year, and Wells Fargo and JPMorgan remained two of the top underwriters of the securities..."
