The Prodigal Obama has failed with GM. A second bankruptcy and more losses for the government are coming after the election. GM’s growth in sales is fueled by GM’s aggressive providing of sub-prime auto loans. GM Financial is the credit arm of GM.
“GM Financial auto loans to customers with FICO scores below 660 rose from 87% of total loans in Q4 2010 to 93% in Q1 2012. The worse the FICO score, the bigger the increase. From Q4 2010 to Q1 2012, GM Financial loans to customers with the worst FICO scores — below 540 — shot up 79% to more than $2.3 billion. The second worst category, 540-599, rose 28% from about $3.4 billion to $4.3 billion. Prime loans, those above 660, dropped 42% to $676 million.“ The bottom line is that GM’s $6.6 billion dollars in sub-prime loans are ten times larger than GM’s prime loans of only $0.676 billion dollars. In the mortgage bust, the sub-prime loans were only one half of the total.In 2010, GM acquired AmeriCredit and changed its name to GM Financial. Americredit had been financing GM vehicles using the following criteria:
— $2,000 minimum monthly income.
Prefer 1 year job history.
Prefer 1 year residence history.
No credit scores below 500.
Prefer at least 3 years of credit and 5 lines of credit.
Chapter 7 and 13 bankruptcies must be discharged.
Cannot currently be involved in credit counseling.
Must be able to pass a standard ID check.
The housing mortgage bubble began inflating in 1999 when Andrew Cuomo at Clinton’s HUD issued the following decree? “HUD Sec. Andrew Cuomo today announced a policy to require the nation’s two largest housing finance companies to buy $2.4 trillion in mortgages over the next 10 years to provide affordable housing for about 28.1 million low- and moderate-income families. Cuomo said the historic action by HUD raises the required percentage of mortgage loans for low- and moderate-income families that finance companies Fannie Mae and Freddie Mac must buy from the current 42 percent of their total purchases to a new high of 50 percent.” The Federal government required that half ($1.2 trillion dollars) of the $2.4 trillion in new mortgages be made to sub-prime borrowers.
GM’s sub-prime auto loans will mostly default in any economic downturn. GM through its GM Financial division will be stuck with a big supply of repossessed vehicles to dispose of, a greatly reduced number of potential buyers and the resulting big losses. Who will GM sell its new vehicles to then? Those with even lower credit ratings?
When GM was taken into bankruptcy, its financial arm GMAC was changed to a separate entity and was renamed Ally Financial. Ally Financial made some of the sub-prime loans for GM and presently funds other GM operations such as dealer inventory. In stress test results released this week (March 2012), Ally Financial Inc fared by far the worst of 19 banks examined by the Federal Reserve, adding to questions about the ability of the former lending arm of General Motors to pay back some $12 billion in taxpayer money. A second (GM) and a third (Ally) bankruptcies are ahead?
GM and Ally are pending failures for US taxpayers and Obama. In its latest monthly report to Congress, the U.S. Department of Treasury said it expected to lose $25.05 billion on the bailout. When the sub-prime chickens come back to roost at GM, US taxpayers will lose all their remaining $10.1 billion worth of stock. Forbes predicts GM will go bankrupt in the second Obama term or under Romney.
Imagine: the delusional prodigal Obama has promised to repeat this with all other troubled industries in our land.