Will Uncle Sam take on bad car loans?
_Donna Harris_ (mailto:[EMAIL PROTECTED]) and _Harry Stoffer_ (mailto:[EMAIL PROTECTED]) Automotive News | September 23, 2008 - 2:45 pm EST WASHINGTON -- Should taxpayer dollars be used to buy up bad car loans? A financial trade association says yes. The idea arose today amid reports of behind-the-scenes maneuvering to broaden a $700 billion federal cleanup of bad debt, which is expected to focus primarily on home mortgages. The car-loans question is separate from the $25 billion in government loans being sought by the auto industry to help retool plants to build fuel-efficient vehicles. Congress is considering up to $7.5 billion in funding to begin financing those loans. But amid the mortgage meltdown enveloping Wall Street, the Securities Industry and Financial Markets Association says the U.S. Treasury Department should have “maximum flexibility” to decide how best to restart credit markets, association spokesman Travis Larson said. His group, representing banks, securities firms and asset management companies, is not prejudging whether securitized auto loans should be in the program, but Treasury should have the option, he said. Other troubled debt includes student loans, home equity loans and credit cards. The American Financial Services Association is asking Congress to allow auto finance companies and other institutions to tap the $700 billion bailout fund designed for the troubled mortgage industry. The trade association, based here, also is proposing that automobile loans be classified as “troubled assets” along with home mortgages. “The goal behind all this is liquidity," American Financial Services Association spokeswoman Lynne Strang told Automotive News. “It's not that auto loans are performing badly. But what's happening in the mortgage business is affecting liquidity, particularly in the secondary markets (where auto loans are bundled and sold as securities). We want auto finance companies to be able to raise the money they need to finance more auto purchases." Strang said the association's proposal is designed to help all its members --which cut across a variety of industries, not just automotive. The Wall Street Journal reported today that some automotive finance companies are lobbying to be included specifically in the proposed bailout, which would be the biggest government intervention in private markets since the Great Depression. Michele Lieber, GMAC’s vice president for government relations, declined comment. GMAC spokeswoman Gina Proia would say only that the company supports action to bring stability to credit markets. GMAC has had losses both in its mortgage business and in auto lending. In 2006 General Motors sold 51 percent of GMAC to Cerberus Capital Management LP, a private equity firm. Cerberus also owns Chrysler LLC and its captive finance company. Bill Himpler, executive vice president of federal affairs for the American Financial Services Association, said, “The ripple effect of the credit crunch in the mortgage sector has brought the nation's finance companies' ability to secure credit lines from investors to a virtual standstill.” He added, “If they are not explicitly included in the definition of a ‘ financial institution,’ these companies will be placed at a distinct disadvantage to the types of institutions explicitly enumerated in the legislative language in their ability to access the liquidity needed to continue to lend to consumers.” This message has been scanned for malware by SurfControl plc. www.surfcontrol.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
