Listen to the Auto Finance News Podcast, in which Matt Petrillo and I discuss the AFN cover story on “Long-Haul Lending” and why more and more consumers are seeking out extended-term auto loans.
We also preview the Auto Finance Summit, which will be held Oct. 22-24 at the Encore Las Vegas.
I think a main point to the FDIC decision has not been addressed by anyone yet. Look at this statement more closely:
“GMAC executives argued to government officials that they needed to reach lower down the credit scale in order to boost business and provide credit to a broader swath of American consumers, according to people familiar with the matter. But the FDIC, concerned about protecting its rapidly depleting bank-insurance fund, imposed policies that made this more difficult.”
The FDIC decision was not made on the actual additional risk Ally Bank wanted to take by raising their credit risk from Prime to Near Prime loans by raising their rates accordingly. Rather they based their decision to protect the rapidly depleting bank-insurance fund. By taking this position FDIC has shifted Ally from a risk-return mindset to a risk-avoidance mindset.
This will in effect hinder the auto market from future development and growth across the board.
Here we have the problem of failing banks stopping another bank (Ally) from helping the auto industry bail its self out of the hole.
I repeat “Will Government Interference Ever Stop?”