Subprime Car Loans Coming Your Way
June 8, 2009 | Filed Under Anti-Americanism, Barack Obama, Budget, Business, Congress, Dan Scott, Democrats/Leftists, Economy/Finances, Government, Corruption, Jobs, Liberals, Society/Culture, Taxes | Comments Off
-By Dan Scott
It really is amazing how predictable an inevitable disaster is to see. The housing bubble created by Congress, the spike in fuel prices created by Congress (now going for a second go round), massive deficit spending again by Congress and the effect yet to be experienced by printing money, i.e. inflation. The failure of the auto company bailouts is now unfolding, they were supposed to prevent bankruptcy and didn’t and now the inevitable tossing of good money after bad in the vain attempt to save the unions, I mean the car companies.
In the examples I listed above, Congress through its transparently well-deliberated infinite wisdom meddled in the economy to come up with these results. Surely, no one is going to deny placing economically disadvantaged people, prone to layoffs in a financially dicey situation will have any other result than failure? Of course liberals denied this and thus increased the price of gasoline with the drilling ban, the results were predictable and inevitable, unemployment went up and so did mortgage defaults. So what is Congress now laying the groundwork for in regards to selling cars from their newly minted Government Sponsored Enterprises (GSEs)?
Beyond the obvious newly minted GSEs of Chrysler and GM, another has been created via TARP, Ally formerly namely GMAC. GMAC was the auto financing arm GM. The sole purpose of this GSE will be to finance the cars produced by GSEs GM and Chrysler. Chrysler just recently signed an agreement using GMAC to help finance their auto sales. Some of you are now getting nervous at the implications because you have an inkling of the inevitable disaster. Now the only way the UAW people can keep their jobs is for GM and Chrysler to sell what they produce. In this market, few people have $15 to $25k to plunk down on a new vehicle. So what to do? The GSE, Ally will have to number one raise money to loan, number two pay higher than market rates to attract that money from depositors to meet reserve requirements and number three give cut rate financing to move vehicles off the lot. Are your knuckles getting white yet?
Who will be buying these vehicles made and financed by the GSEs? In the face of rising gasoline prices and a sluggish economy what group can least afford a new vehicle? The same group championed by liberals to be unionized and subsidized under the guise of equality of outcome, the economically disadvantaged. After all, how is it fair for them to live off the scraps of society to drive used vehicles, which pump CO2 into the air? Can such people afford high interest rates or down payments? Well then, the liberal answer is clear, the government must subsidize the purchase of those new fuel-efficient vehicles in some manner.
Subsidizes come in all clever manner of shapes, however, there is one thing that is consistent, they take from one group and give it to another. Since Ally is a bank, the FDIC insures those deposits up to $250,000. Guess who pays the deposit insurance for the FDIC to guarantee that deposit insurance? Why all the healthy banks. Where do the banks get the money to pay the insurance premiums to the FDIC? Oh come now, did you really think it was for free? The point of any business is to make a profit to justify the risk of investment. The expenses and profit has to come from somewhere, namely various and sundry fees banks charge it’s customers for services. When Congress recently passed the credit card reform act tightening the regulations on fee changes who do you think collected those fees? The banks that run the credit card operations. Here’s the punch line: So is it in Ally’s interest to finance subprime car loans when as a GSE in the end can recoup it’s losses via the other bank’s FDIC premiums and likely have an unlimited line of credit at the Federal Reserve? Does this sound like a college loan program with high default rates? A car loan from Ally will be a de facto loan from the government, except it won’t show on the government’s balance sheet until the program crashes.
Will Ally become the new Freddie Mac and Fannie Mae of auto loans, which the government will fully guarantee thus adding to the trillions in national debt? If the public doesn’t universally shun these GSEs but instead they are allowed to sell a boatload of cars to people who can’t afford them, we then have the makings of another government inspired predictable bubble and coming bust in the financial system. All the while the politicians will rhetorically proclaim UAW jobs were saved, I mean GM and Chrysler were saved. Has anyone seen the new commercials soliciting deposits on TV claiming to be a new bank? Guess who is doing this? Ally. So now you know how the government is planning to finance GM and Chrysler vehicles. How’s that for socialism for you? Yep, here is the next bubble getting ready to form. You know that feeling of anticipation sitting in a rollercoaster at the top of the mountain you are just about to plunge down? Are you feeling it yet?
———-
Dan Scott calls himself a “Member of the Global Capitalist Cabal preaching Capitalism and personal responsibility as the economic solution to world poverty.” He is also a member of the 14th Amendment Society — victimhood is a liberal code word for denying the civil rights of others. He is also a proud member of the Global Warming Denier Cabal, insisting that facts not agendas determine the truth.
Dan can be seen on the web at http://www.geocities.com/fightbigotry2002/ as well as http://www.geocities.com/dscott8186/saidwebpage.htm, And can be reached for comments at dscott8186@yahoo.com.
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