Date of Submission

Spring 2017

Academic Programs and Concentrations

Economics

Project Advisor 1

Pavlina Tcherneva

Abstract/Artist's Statement

This project is composed of two essays examining the credit markets for the finance of automobiles. In particular, both chapters focus on subprime loans for the purchase of used cars, often financed by independent finance companies. In the first chapter, I review Hyman P. Minsky’s writing on credit and securitization to create a theoretical framework that explains how auto finance has evolved. This chapter’s analysis primarily compares the current period of subprime auto finance with short boom and bust cycle experienced by the auto finance sector in the 1990s. The second chapter reviews various evidence of discrimination in subprime auto lending, and explains how this could create instability in returns to the securitized assets these loans back. Lastly, this chapter sets out three proposals of effective regulation: the strengthening of the CFPB, expansion of relationship banking initiatives, and “skin in the game” regulations for auto ABS issuers.

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Open Access

Creative Commons License

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