Sub-prime vs. Cash 4 Clunkers

Mortgage and Lending with Citizens National Bank


I would like someone to help me understand what the difference is in these two programs.  Not in the details, but in the nature of the programs and what they were designed to accomplish. 

 Tax Money

Let me start off these thoughts by reminding everyone that a total of almost $3,000,000,000 (billion) was spent on this program that came from OUR tax money.  I really believe many people have lost sight of how much this really is; I mean, think about it for a minute and research this amount of money in perspective.

 Sub-prime lending for cars

I would also like to put some scattered thoughts together first.  I have read about when the government started the CRA requirements for lending.  This was not such a big deal until the 90's when it was made a requirement under penalty of suit by the government for banks to adhere to certain rules.  This sounds about the same time period these sub-prime mortgages came around to get people into homes that normally wouldn't buy so banks could meet the restrictions set.  I am very confident many of us know what that has caused. 

Furthermore, let's move on to our struggling automotive market.  Just like the housing market (and individually whomever our politicians feel need help), our automotive market was struggling.  The bail-outs didn't, well, really work.  If it did, I haven't heard how (Again, our tax money).  In response to these bail-outs we just had to pass immediately not working, for one reason or another we still rely on our automobile sales to pull through this recession.  Obviously, sales from people who can still afford a new vehicle in spite of the down turn in the economy is not enough.  So, let's figure out a way to lure those who are not buying!  That is a great idea, right?  Well, I believe there are reasons those people aren't buying a new vehicle.  Despite those reasons, they trade in their car for as much as $4,500 for another off of a short list they can chose from at a higher interest rate (sub-prime market?).  Best case-scenario, they owe nothing on their car with no payment.  They drive the car off the lot and lose the $4,500 they just traded in as lost equity.  Now, at this higher interest rate, they are paying MUCH more in the form of a payment no matter what the case, and will be more inclined to owe more on their shiny new car than what it is worth by next year or the year after.  Can we connect that with anything we have experienced recently?  I am not very good with words sometime and feel there may be someone much more charismatic that could make this sound like a much greater area of concern, but I think we get the picture. 

 Being green with new vehicles? 

I hope everyone knows that they will NOT save enough money on gas to pay the additional they are in the form of a car payment.  But, they are still helping the economy, right?  Not really.  I believe the average was a 9 MPG improvement (please correct me if I'm wrong).  Either way, these values are based off of estimated MPG of the new vehicle.  I can attest to never seeing those numbers or hearing anybody who does.  Either way, we still have to remember it was mandatory for these vehicles be crushed.  To save time, I will just let everybody use their imagination on how "green" that process is.

 Opportunity Costs?

As a final note, I believe everyone knows about new health care reform or has at least heard about it.  Whatever you views on that (bad idea, in my opinion, but I've actually read the most recent bill), I think we might agree on better ways to spend this CARS money.  For instance, I listened to a person tell me his wife is suffering from a life-threatening illness that there is currently no true cure for.  He is not a wealthy man and does have insurance so it helps, but the costs add up as you can imagine.  Now, we have the government taking away his money to help people buy new cars when he would love to use that money to help with his wife's treatment. 

 I could go on and on with this for a long time, but I won't.  I think I have expressed my opinion and information somewhat clearly.  As I said before, there are people much better at writing than I but I hope this information spurs on some thoughts and may help someone.  It definitely helps me to get my thoughts out on paper sometimes.

 Also, I would love to hear the comments but please keep them article related.  If I have mistyped a word, forgive me and let is pass.  Thank you.

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