Welcome to the Daily 5 report for Friday, Sept. 19. TGIF!
The Chapter 7 bankruptcy liquidation at subprime auto lender Tricolor Holdings is festering into a messy scandal.
In the balance: 100,000 subprime car loans to be taken over under court supervision for distribution. The company filed for bankruptcy protection Sept. 10 amid fraud allegations. But there's a lot more to this story.
As Bloomberg reports, the sudden collapse of Tricolor, which focused on lending to individuals with little to no credit history, has ensnared some of Wall Street's biggest players. Banks including JPMorgan Chase and Barclays are bracing for hundreds of millions of dollars in losses, while investors who piled into asset-backed bonds sold by the company as recently as June have seen the prices of their securities plunge.
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The U.S. Department of Justice has launched two investigations into Tricolor's failure, a bankruptcy trustee said.
Meanwhile, the folks with bruised credit carrying loans from Tricolor are wondering where to send payments. Asked how many people are calling, one of the attorneys for the bankruptcy trustee said: "The numbers, as the court can probably guess, are somewhat staggering."
Subprime auto lending is a tricky business — with lenders giving loans to financially unstable customers who are often looking for a last chance to buy a car.
When done right, everyone wins: The borrower gets a car, the lender generates new business and investors get a healthy profit.
But when done wrong, everyone suffers. It'll be hard to find anything good coming from the Tricolor case.
Meanwhile, the Senate has confirmed Jonathan Morrison to head the National Highway Traffic Safety Administration and 47 other nominees, marking the first time NHTSA has had a permanent leader in three years.
Based on NHTSA's recall work since Morrison joined as the interim head, the agency isn't going asleep anytime soon.
The main question about Morrison is how tough NHTSA will get with pending safety investigations into Elon Musk's Tesla. As most of the world witnessed, Musk and President Donald Trump engaged in a nasty public falling-out in June after Musk departed the administration as the temporary head of the Department of Government Efficiency.
That's enough for now. Have a great weekend.
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— Philip Nussel, online editor
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