No, There's Not a Bubble in Subprime Auto Loans

There has been plenty of worry that there may be too much froth in subprime auto loans. The New York Times, in an investigation last month, found a “bubble” fueled by a troubling pattern of people getting credit who had no ability to pay back their loans, and there are signs that the Justice Department is starting an industry-wide probe into the market.

Last year, the New York Fed dove into lending data, and its economists found that the bubble fears may be misplaced, at least for the time being. Next week, the New York Fed plans to release an updated analysis, and “it’s unlikely the composition of auto loan originations seen in our data will radically change since last year,” according to Matthew Ward, an associate director of media relations at the New York Fed.