Well that was quick. Call us the United States of Amnesia. First, we bail out GM and bondholders get wiped out, or had their money taken away from them and handed to the auto unions to pay off favors. Many folks had GM bonds in their retirement or investment portfolios somewhere, so we essentially were robbed.
GM provided subprime loans to finance the sale of vehicles, to people who probably shouldn’t have been purchasing new vehicles. Why buy a used car when you can get a new one, even if you really can’t afford it. Part of GM’s collapse was due to it’s financial arm’s lending, it definitely contributed to the problem. Now they are back in that same business, spending ~$3.5B to buy a subprime financier. Let’s see if Congress or the President will have anything to say about it. Probably not because the tap dance will be about job creation, never mind if we decide to repeat history.
General Motors Co. is getting back into subprime lending, a move that will give its dealers more options to lease and finance car sales but one which critics worry could drive the automaker into another financial pileup.GM said Thursday that it would purchase AmeriCredit Corp. in an all-cash transaction valued at about $3.5 billion, or $24.50 a share.The acquisition gives GM whats known as a “captive finance unit” or lending division that allows it more flexibility to offer lease and finance deals. It would fill the role once played by GMAC; the automaker sold all but a minority interest in that company in 2006.”Adding AmeriCredit to our team will improve our competitiveness in auto financing offerings, and I am very pleased to have them on board,” GM Chief Executive Edward E. Whitacre Jr. said.But the deal immediately drew fire from critics, who recalled how the Detroit automakers former addiction to providing easy credit and cut-rate financing contributed to GMs financial woes and eventually a federal bailout that cost taxpayers billions of dollars.