Automakers Want Help Selling Cars Via Loan Availability
By Michelle Krebs November 24, 2008Detroit Three automakers plan to return to Washington to make their second pitch for federal bridge loans next week and will also ask Washington to help them sell more cars by making car loans more available.
On Monday, Sen. Charles Schumer (D., N.Y.) is sending a letter urging the Federal Reserve to make financing available for the auto companies' lending arms, which would allow them to offer more auto loans, a spokesman for the senator told the Wall Street Journal. The letter will also ask the Treasury to speed approval of GMAC's request to become a bank holding company, making it eligible for the $700 billion in loans to financial institutions.
The automakers insists there's no way they can return to profitability at the current level of car sales. Vehicle sales were tracking at under an 11 million annualized rate in October, a rate expected to continue for the next few months at least.
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At first I thought this was a great idea. But then I thought to myself, this isn't a solution. The only effect this would have would to propogate the very loans that have gotten this country in trouble in the first place. Folks with adequate credit scores haven't really been affected by the credit crisis. It's the subprimers that are hurting. If you'll allow the exaggeration, by providing funding for the guy flipping burgers at McD's to purchase a brand new Escalade, the Fed only supports the very problem we're trying to fix.
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