One of the reasons for GM’s prosperity in the “good old days” was GMAC. The amount of money that GM made selling a car was secondary to the money it could make from the financing of the car through GM’s car financing subsidiary.
President Obama’s idea to get the US government involved in car loans tries to replace the market forces that drove GM to seek profit from lending money for cars rather than building cars with a central government controlled agency which will be motivated by policy objectives and government control. Create a fund like this, you put everyone else in the financing business out of business. Car finance companies don’t have a printing press that lets them print money to lend.
If the US Government starts becoming an auto loan lender, how can it avoid repeating the mistakes of Freddie Mac and Fannie Mae? What if someone wants to borrow money to buy a car made by a non-UAW manufacturer?
The woman who was widely mocked for saying that now that Obama is President, she won’t have to make her house payment and will get a free car was telling you the truth – the problem is people didn’t believe her.
Tags: bankruptcy, GM, obama