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.
Speaking for myself, I see GMAC caught in a Catch 22, Gary. On the one hand, it sees an opportunity to make more loans to borrowers with lower credit scores — presumably because the risk-reward calculation makes sense — yet the FDIC is restricting GMAC from doing so to protect the government’s losses. There appears to be a mismatch in risk assessment between the government and GMAC, and in the end, which entity ideally should divine GMAC’s course? The federal government, which is facing a depleted deposit insurance fund and seeks to minimize (I might argue, eliminate) its risks vs. GMAC, which is better-suited to assess the auto finance market and maximize its returns on capital there? It would appear that the FDIC has made the decision for GMAC — and that constitutes “government interference.” (A caveat, I certainly don’t mean “government interference” in the malicious, legal manner, meaning I do not believe the federal government is out to “harm” GMAC.)
Then again, the government, which owns much of GMAC, can do with it what it pleases.