GMAC and the FDIC appear to be at loggerheads over auto finance.
According to an article in today’s Wall Street Journal, GMAC and the FDIC have been battling over GMAC’s auto finance business. An excerpt from the article:
All this made it difficult for GMAC to stem declines in its auto-finance business. The average car loan made by GMAC’s bank this year is to a customer with a credit score of more than 750, above the U.S. median. GMAC made $5.6 billion of new car loans in the second quarter, up from late last year but far below the $12.5 billion made in the year-earlier period.
GMAC has the option to lend to riskier borrowers through the parent company, which is regulated by the Fed. The Fed allows GMAC’s financing arm to offer loans to consumers with credit scores as low as 621, and in some cases even lower. But raising money for such loans in the bond market is costlier than it is for Ally Bank to bring money in through bank deposits.
Looks to me like an example of how a heavy-handed federal government can unduly limit an enterprise trying to regain its financial footing through a reasonably sound strategy. How do other AutoFinanceNews.net members see this?
