GM Buys a Subprime Lender for $3.5 Billion

[Milton Kuo]

From The New York Times article, "G.M. Buys a Subprime Lender for $3.5 Billion":

General Motors said Thursday it had agreed to buy a financing company, AmeriCredit, for $3.5 billion so it can lease more vehicles and increase sales to consumers with lower credit ratings.

Hmmm.... I seem to recall that GM's last adventure in lending ended with a government bailout of GMAC. In this dire economic environment, it seems likely that subprime borrowers will be an even worse credit risk than they were during the housing and credit bubble.

General Motors said it would continue to use Ally Financial and other banks to procure financing for prime customers.... Owning AmeriCredit would let the company offer more leases and approve customers that Ally or other banks might have rejected....

So GM is going to send profitable prime borrowers to Ally, a now independent financial institution, while keeping the risky subprime borrowers for itself. Unless GM is able to sell the loans into the securitized debt market, this sounds like another bailout in the making.

[doom&gloom]

Re: GM Buys a Subprime Lender for $3.5 Billion

From The New York Times article, "G.M. Buys a Subprime Lender for $3.5 Billion":

General Motors said Thursday it had agreed to buy a financing company, AmeriCredit, for $3.5 billion so it can lease more vehicles and increase sales to consumers with lower credit ratings.

Hmmm.... I seem to recall that GM's last adventure in lending ended with a government bailout of GMAC. In this dire economic environment, it seems likely that subprime borrowers will be an even worse credit risk than they were during the housing and credit bubble.

General Motors said it would continue to use Ally Financial and other banks to procure financing for prime customers.... Owning AmeriCredit would let the company offer more leases and approve customers that Ally or other banks might have rejected....

So GM is going to send profitable prime borrowers to Ally, a now independent financial institution, while keeping the risky subprime borrowers for itself. Unless GM is able to sell the loans into the securitized debt market, this sounds like another bailout in the making.

well, they blew up once with GMAC, maybe the 2nd time is the charm?

More seriously, why are WE, the taxpayers, doing this?

[pescamaaan]

Re: GM Buys a Subprime Lender for $3.5 Billion

well, they blew up once with GMAC, maybe the 2nd time is the charm?

More seriously, why are WE, the taxpayers, doing this?

it all makes perfect sense. Barney Frank, Chris Dodd, the President, etc have all stated quite emphatically that [we] need to get banks lending again, get loans out there, get people borrowing again, etc in order to move the economy forward. you know, do exactly the same thing that caused this whole mess to begin with. (a sign of true competence i must say )

so why not have the auto company that you [the federal government] own buy a subprime lender so that people with poor credit can again have access to buying and leasing your product?

who's gmac?